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Peso to climb on inflation, GDP

THE PESO may strengthen this week on the back of expectations of lower inflation and faster economic growth.

The local unit closed at P50.74 against the greenback on Thursday, stronger by 14 centavos from the P50.885-a-dollar close on Wednesday.

The peso gained 50 centavos week-on-week from its P51.24 finish on Oct. 24.

Dollars traded on Thursday grew to $1.16 billion from $1.049 billion on Wednesday.

A trader said the peso’s performance last week was driven by the rate cut made by the US Federal Reserve.

“The peso strengthened together with other Asian currencies after another rate cut by the Fed which deducted another 25 basis points to key interest rates,” the trader said in a phone call.

The US Federal Reserve on Wednesday cut interest rates for the third time this year to help sustain US growth despite a slowdown in other parts of the world, but signaled there would be no further reductions unless the economy takes a turn for the worse.

“We believe that monetary policy is in a good place,” Fed Chair Jerome Powell said in a news conference after the US central bank announced its decision to cut its key overnight lending rate by a quarter of a percentage point to a target range of between 1.50% and 1.75%.

For this week, a combination of local and US data could affect the peso’s swing.

“The markets will be anticipating the latest inflation data and the gross domestic product (GDP) growth as well as the effectivity of the one-percentage point cut in the banks’ RRR (reserve requirement ratio)…that could support sentiment on the local economy and financial markets,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Meanwhile, the trader said the US job growth slowdown could also affect peso-dollar trading.

“We have seen the US job data release and next week will have a barrage of data including the inflation and the GDP,” the trader said.

US job growth slowed less than expected in October as the drag from a strike at General Motors was offset by gains elsewhere and hiring in the prior two months was stronger than previously estimated, offering some assurance that consumers would continue to support the slowing economy.

US non-farm payrolls increased by 128,000 jobs last month, with manufacturing shedding 36,000 positions because of the strike — the most since October 2009, the government’s survey of establishments showed. Striking workers who do not receive a paycheck during the payrolls survey period are treated as unemployed. The strike by about 46,000 workers at GM plants in Michigan and Kentucky ended last Friday.

Meanwhile, the Philippine Statistics Authority will report the inflation and GDP data on Nov. 5 and Nov. 7, respectively.

Mr. Ricafort sees the peso trading at P50.50-51.00 this week, while the trader sees it playing around the P50.80-51.30 band. — L.W.T. Noble with Reuters

The post Peso to climb on inflation, GDP appeared first on BusinessWorld.

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