Monday, 20 January 2020 07:41

Peso likely to depreciate ahead of FOMC meeting

FOMC meeting FOMC meeting

THE PESO could depreciate this week versus the dollar ahead of an anticipated rate hike in the United States, although optimism towards the local stock market and the rollout of economic reforms could temper such weakness.

 

The peso may weaken this week as investors look ahead to the US Federal Reserve’s policy meeting.

The local unit moved sideways on Friday to close at P49.50 against the greenback, nearly flat coming from Thursday’s P49.495 finish. Week on week, the peso appreciated for the third straight week from P49.55-to-a-dollar seen on June 2.

The peso even traded at a six-month high of P49.40 on June 5, its best showing since a P49.35 close on Nov. 16, 2016. Traders attributed the currency’s strength to comments from Moody’s Investors Service that the passage of the first tax reform package at the House of Representatives is “credit positive” for the Philippines.

Local financial markets remained closed on Monday in observance of Independence Day.

An analyst interviewed over the weekend said the peso might weaken in the coming days ahead of an expected “lift-off” in US interest rates during the Federal Open Market Committee’s (FOMC) June 13-14 meeting, coupled with market uncertainty towards the United Kingdom.

“The dollar might appreciate this week, fueled by the likely interest rate hike of the US Federal Reserve and safe-haven buying amid political concerns in the UK that could derail Brexit negotiations,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines.

“However, the greenback’s strength might be tempered by mixed US data and possible hints of a slower pace of US interest rate normalization in the coming months,” Mr. Dumalagan said.

Traders are pricing in a 25-basis-point rate increase from the FOMC this week, which would be the second hike this year following a similar move announced in March.

On the other hand, markets grew uncertain towards the UK and the pound sterling after the June 8 general elections left Prime Minister Theresa May with a minority in parliament ahead of formal discussions for Britain’s departure from the European Union, Reuters said in a report.

Another trader said the Fed hike has already been priced in by market players, so any movements on the exchange rate can be influenced by developments in the local economy.

“The Fed hike has been anticipated already, so I think what people will want to watch is the turnout of the first half... From a week-on-week perspective, the peso is appreciating mainly because of the stock market,” the second trader said by phone. “The second quarter also saw the markets ecstatic on tax reform, it showed the government’s commitment to pass it.”

The bellwether Philippine Stock Exchange index also breached a new high for the year at 8,001.38 on Monday last week, which was likewise traced to optimism on the government’s tax reform plan.

The House of Representatives approved the first package on May 31 covering lower personal income taxes versus higher excise duties on other goods, leaving the bill open for discussions and approval in Senate as Congress resumes sessions next month.

For the week, Mr. Dumalagan expects the peso to move within the P49.20-P49.90 range, while the second trader expects the local currency to trade between P49.30 and P49.60 versus the greenback.

 
  • Creating Websites: A Step-by-Step Guide
    Creating Websites: A Step-by-Step Guide

    In today's digital age, having a strong online presence is crucial for businesses, organizations, and even individuals. One of the fundamental ways to establish this presence is by creating a website. Whether you want to showcase your portfolio, sell products, or share your ideas, building a website can be a rewarding and accessible endeavor. In this article, we'll guide you through the process of creating a website step by step.

    Written on Tuesday, 28 November 2023 15:11 in Business Read more...
  • Stylish Wedding Suits for Men: Elevate Your Wedding Day Look
    Stylish Wedding Suits for Men: Elevate Your Wedding Day Look

    When it comes to planning a wedding, the focus is often on the bride and her stunning dress. However, the groom's attire is just as crucial. Every groom deserves to look his absolute best on the big day, and that begins with finding the perfect wedding suit. In this comprehensive guide, we will delve into the world of stylish wedding suits for men, offering insights and inspiration to help you choose the attire that will make you stand out on your special day.

    Written on Thursday, 23 November 2023 11:35 in Business Read more...
  • When should snow be removed from a flat roof?
    When should snow be removed from a flat roof?

    Sense Monitoring experts share their knowledge and tell you how to measure the snow load correctly and when to start removing snow from the flat roof. This will increase the safety of the building's occupants.

    Written on Thursday, 16 November 2023 11:11 in Economy Read more...
  • Stock Photography's Versatility
    Stock Photography's Versatility

    Discover the benefits of using stock photos and provide tips on how to make the most of them for your online endeavors.

    Written on Tuesday, 31 October 2023 15:54 in Internet Read more...
  • Frost and structural monitoring
    Frost and structural monitoring

    Winter conditions make it difficult to safely manage flat roofs. Measuring snow cover and snow removal from the roof become particularly problematic. How can both activities be carried out safely?

    Written on Monday, 30 October 2023 10:55 in Internet Read more...
  • How Pips Impact Your Profits: Unveiling the Forex Mystery
    How Pips Impact Your Profits: Unveiling the Forex Mystery

    Are you looking to make profits in the foreign exchange (Forex) market but feel overwhelmed by its complexities? It can be challenging to understand how different elements of the Forex market work together, so understanding what pips are and how they affect your trading decisions is essential for success.

    Written on Monday, 23 October 2023 08:41 in Company Read more...
  • Discovering Bristol: A City Bursting with Life and Culture
    Discovering Bristol: A City Bursting with Life and Culture

    Bristol is a hub of culture, history, and vibrancy. Nestled in the south-west of England, this city draws thousands every year, each eager to delve into its rich tapestry of attractions. Whether you're considering a visit or looking to settle down, Bristol promises a myriad of experiences.

    Written on Monday, 25 September 2023 10:29 in Company Read more...
  • Top 5 Reasons Why the Nation Requires HGV Drivers
    Top 5 Reasons Why the Nation Requires HGV Drivers

    Lately, concerns about the shortage of HGV drivers have been causing anxiety across the entire nation. Factors such as the UK's departure from the EU and the unpredictable pandemic have contributed to a decline in the number of qualified professionals who can effectively operate and manage essential trucks and lorries. the Road Haulage Association has even approximated a shortage of approximately 100,000 drivers at one point.

    Written on Monday, 18 September 2023 07:48 in Company Read more...