Peso likely to rise further
THE PESO could continue to strengthen against the dollar this week ahead of another speech by the US Federal Reserve chief and the release of a report on economic conditions in the United States, which could both affirm expectations of a rate cut by the US central bank as early as September.
The local unit closed at P58.38 per dollar on Friday, weakening by 7.5 centavos from its P58.305 finish on Thursday, Bankers Association of the Philippines data showed.
Meanwhile, week on week, the peso strengthened by 15 centavos from its P58.53-per-dollar finish on July 5.
The peso dropped against the dollar on Friday in a “healthy correction” following its seven-day climb, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The local unit still posted a week-on-week rise amid a broadly weaker dollar and lower US Treasury yields on Friday after soft June US consumer price index (CPI) data that boosted Fed cut bets, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.
On Friday, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.24% at 104.09, Reuters reported.
The yield on benchmark US 10-year notes fell 1.2 bps to 4.181% from 4.193% late on Thursday, while the 30-year bond yield fell 1 bp to 4.3941% from 4.404% late on Thursday.
The consumer price index dipped 0.1% last month, the first drop since May 2020, after being unchanged in May, the Labor department’s Bureau of Labor Statistics said.0.4% in May.
In the 12 months through June, the CPI climbed 3%, the smallest gain since June 2023. That followed a 3.3% advance in May. Economists polled by Reuters had forecast the CPI ticking up 0.1% and gaining 3.1% year on year.
For this week, Mr. Ricafort said the market will monitor Mr. Powell’s speaking engagement at the Economic Club of Washington, D.C. on July 15 (Monday) and the release of the Fed Beige Book on July 17 (Wednesday) for more hints on the Fed’s policy path.
The June US producer price index (PPI) report released on Friday could also affect the peso-dollar exchange rate, Mr. Roces added.
The US producer price index for final demand rose 0.2% last month after being unchanged in May, the Labor department’s Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast the PPI nudging up 0.1%.
In the 12 months through June, the PPI increased 2.6%. That was the largest year-on-year gain since March 2023 and followed a 2.4% advance in May.
Mr. Ricafort sees the peso moving between P58.10 and P58.60 per dollar this week. — AMCS with Reuters