Peso may strengthen vs dollar on remittances, inflation data

peso dollar bills 040318 - Peso may strengthen vs dollar on remittances, inflation data

THE PESO could strengthen this week on the back of support from continued remittance inflows this month.

The local unit finished trading at P50.81 versus the greenback on Friday, losing 10.5 centavos versus the P50.705-a-dollar close on Thursday, according to data from the Bankers Association of the Philippines.

Week on week, the peso also depreciated by a centavo from its P50.80 close on Nov. 22.

Dollars traded grew to $1.108 billion from the $1.045 billion seen on Thursday.

A trader attributed the local unit’s weakness to the market’s woes on developments revolving on the US-China trade conflict.

“There’s this risk-off deadline involving Huawei,” a trader said in a phone call on Friday.

Meanwhile, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said the recent signals from the central bank chief of a possibility of another rate cut could also be among the factors for the weaker peso seen on Nov. 29.

Reuters cited a Wall Street Journal report that Huawei Technologies Co., Ltd. challenged a US Federal Communications Commission (FCC) decision that did not allow US rural carrier customers from utilizing an $8.5-billion government fund to buy equipment from the Chinese firm.

Citing people familiar with the matter, the Wall Street Journal reported that Huawei is expected to file a suit to challenge the said FCC decision this week.

“We don’t comment on speculation,” Huawei spokesman in Shenzhen told Reuters.

Meanwhile, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno hinted last Monday that another rate cut could be possible in December should conditions warrant further easing.

“The BSP will always be data-dependent so we will evaluate…every time we have a policy meeting,” he told reporters last week..

Benchmark policy rates currently stand at four percent for the overnight reverse repurchase facility, 3.5% for overnight deposit and 4.5% for overnight lending.

This is after the 75 basis points (bps) in cuts unleashed by the central bank through three 25-bp rate reductions earlier this year.

The Monetary Board is set to have its eighth and final policy-setting meeting for the year on Dec. 12.

For this week, among the factors that could affect the local unit’s strength are the progress of the US-China trade deal, remittance influx, as well as local data.

Mag-pepeak ang remittance flows (Remittance flows will peak) this December. Also, all eyes will continue to be on the trade war saga,” the trader said.

“Financial markets will be anticipating for the latest inflation data for the month of November, which is expected to be slightly higher from a 3.5-year low of 0.8% in October,” RCBC’s Mr. Ricafort added.

Meanwhile, the BSP Department of Economic Research last week said November inflation likely fell between 0.9-1.7%, citing higher electricity and fuel costs.

The range is above the 0.8% print in October. However, it is slower than the 6% logged in November 2018.

A BusinessWorld poll of 16 economists yielded a median inflation estimate of 1.2% for November on the back of diminishing base effects. If realized, this would also be a pickup from the October print.

The Philippine Statistics Authority is set to release November inflation data on Dec. 5.

For this week, the trader sees the peso playing around the P50.45-50.75 range, while Mr. Ricafort expects the local unit to play around the P50.50-51 level. — LWTN with Reuters

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