Philippine peso may hold at P63 level on U.S. jobs data, Iran tensions

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Peso may hold at P63 on U.S. jobs

Highlights

The Philippine peso closed at P63.055 per dollar on Friday, weakening 8.5 centavos daily but strengthening 68.5 centavos week-on-week versus the dollar.
October U.S. nonfarm payrolls rose by 165,000 versus the 65,000 forecast, raising the implied Fed rate hike probability next month to about 80%.
Peso trading remains pressured by U.S. rate policy and geopolitical tension with Iran, but oil price declines and remittance inflows provide some domestic support.

Drivers behind this week's peso trading range

As reported by BusinessWorld Online, the peso could move within the P63 level versus the dollar after stronger-than-expected U.S. labor market data reinforced expectations of another Federal Reserve rate increase in December and risk sentiment remained fragile amid tensions involving Iran.

On Friday, the local currency weakened by 8.5 centavos to close at P63.055 per dollar from P62.97 on Thursday, based on data from the Bankers Association of the Philippines. Week on week, however, the peso strengthened by 68.5 centavos from its P63.74 finish on Oct. 30.

A trader said the peso slipped on Friday as fresh risk-off sentiment accompanied a sell-off in U.S. technology stocks tied to artificial intelligence concerns. For Monday, the trader said price action depends on U.S. nonfarm payrolls data, with strong figures likely to push the pair toward P63.30, while signs of a weakening labor market may lead to another round of dollar selling and move it toward P63.80.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso also rebounded week on week as lower global crude oil prices reflected hopes for de-escalation in the U.S.-Iran war after more Democrats won in the U.S. midterm elections. He added that the stronger October U.S. payrolls report supports expectations of another Fed rate hike next month.

External pressures and domestic support factors

U.S. job growth accelerated in October and the unemployment rate fell to 4.1%, signaling a labor market that could be regaining strength after a softer mid-summer period. The Labor Department's employment report also showed the economy added 84,000 more jobs in August and September than previously estimated, while nonfarm payrolls rose by 165,000 jobs last month, well above economists' forecast of 65,000.

Financial markets are now pricing in about an 80% chance of a Fed rate hike at next month's meeting, up from 66.9% a day earlier, according to CME's FedWatch tool. The Fed left its benchmark overnight rate in the 3.75% to 4% range last month.

Beyond U.S. monetary policy, the peso is continuing to track global crude oil price movements and may receive support from higher remittances during the current quarter, Ricafort said. Markets are also watching the geopolitical backdrop after mediators intensified efforts to end the war between Iran and the United States, while President Donald J. Trump has threatened a new offensive against Iran, raising concern across Gulf countries over possible retaliation against infrastructure.

Our earlier article on the peso’s record slide to the P63-per-dollar level looked at how the currency weakness weighed on sentiment even as Philippine shares rebounded on bargain hunting. We also noted that investors were staying cautious amid shifting global risk appetite, with attention on macro signals such as U.S. rates and broader market flows.

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