Philippine peso seen trading sideways as Fed outlook, bond auction guide market
Currency markets in the Philippines are bracing for a week of limited movement as traders look for clearer signals on U.S. monetary policy and local market catalysts. The peso ends Friday at P63.72 per dollar, with the government’s planned onshore retail dollar bond auction and the ASEAN Leaders’ Summit also in focus.
Highlights
- Peso expected to trade sideways between P63.45 and P64 this week as markets await signals on U.S. Federal Reserve rate policy.
- Peso closes at P63.72 per dollar, down 66.5 centavos week on week, pressured by Fed rate hike expectations and higher global crude oil prices.
- Bureau of the Treasury targets at least $200 million in retail dollar bonds at Thursday's auction, potentially moving the peso amid ongoing dollar strength.
Drivers shaping this week’s peso trade
As reported by BusinessWorld Online, the peso is expected to remain rangebound against the dollar this week as market participants wait for fresh clues on the U.S. Federal Reserve’s policy path. A trader says the local currency could consolidate between P63.50 and P64, while Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort sees a P63.45 to P63.95 range.On Friday, the peso slips by two centavos to close at P63.72 a dollar from P63.70 on Thursday, based on data from the Bankers Association of the Philippines’ website. Week on week, the local unit is down 66.5 centavos from its P63.055 finish on Nov. 6.
A trader says the dollar-peso pair closes higher after touching P63.94 as the market prices in a Fed rate hike in December, with more increases expected next year. Profit taking ahead of U.S. producer price index data also tempers moves, according to the trader.
External pressures and local catalysts
Ricafort says the peso also weakens against the dollar after global crude oil prices correct higher amid escalating tensions between the U.S. and Iran. He adds that developments during the 49th ASEAN Leaders’ Summit, hosted by the Philippines this week, could influence sentiment in the local market.The rate-setting auction for the government’s onshore retail dollar bonds, scheduled for Thursday, could provide another catalyst. The Bureau of the Treasury is seeking to raise at least $200 million, or about P12.8 billion, from the issue.
Broader dollar strength continues to shape the near-term outlook for the peso. Reuters says the dollar is on track for its strongest weekly rise in two months on Friday, hovering near a 19-month high as expectations of a larger Federal Reserve rate hike lift U.S. Treasury yields, with hawkish Fed comments and stronger-than-expected U.S. inflation data adding to those bets.
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