Philippine Peso Strengthens to P60.705 as Weak US Jobs Data Pressures Dollar
Key Takeaways
- •The Philippine peso gained 19.5 centavos to close at P60.705 per dollar on Monday, strengthening from its P60.90 finish in the previous session.
- •Weaker-than-expected US nonfarm payrolls data prompted markets to reduce expectations for a Federal Reserve rate hike in September, easing pressure on emerging Asian currencies.
- •BSP Governor Eli Remolona signaled the central bank's readiness to further tighten monetary policy to combat inflation, providing additional support for the peso.
- •Trading volume fell to $1.47 billion from $1.84 billion in the prior session.
- •Traders project the peso to trade within a range of P60.50 to P60.90 against the dollar on Tuesday, with attention focused on upcoming US inflation data and Middle East geopolitical developments.
The Philippine peso appreciated on Monday as the dollar remained under pressure, with weaker-than-expected US jobs data prompting markets to reassess expectations for further Federal Reserve rate hikes. The pullback in rate-hike bets has broadly eased pressure on emerging Asian currencies, which tend to weaken when higher US yields draw capital toward dollar-denominated assets.
The local currency gained 19.5 centavos to close at P60.705 against the greenback, up from its P60.90 finish on Friday, according to data from the Bankers Association of the Philippines' website. The peso opened Monday's session at P61.85 per dollar — its weakest level of the day — before strengthening to its intraday best of P60.705 at the close.
Trading volume declined, with dollars exchanged falling to $1.47 billion from $1.84 billion in the previous session.
"The peso strengthened after the softer US jobs report eased market expectations of a potential US rate hike in September," the first trader said in an e-mail.
A second trader, speaking by phone, noted that the peso's move tracked the dollar's correction on Friday, when US nonfarm payrolls came in below expectations, pushing back bets on a Fed rate increase. The trader added that market participants are awaiting the latest US inflation data, which could also influence the central bank's policy stance.
The currency received additional support from Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr., who said on Monday that the central bank is prepared to tighten its policy stance further to bring down inflation, according to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message. A hawkish BSP signal can support the peso by helping maintain the interest-rate differential between the Philippines and the US, which influences capital flows.
Looking ahead to Tuesday, the first trader said the peso could continue to gain ground ahead of likely slower US inflation data due this week, while the second trader said players will continue monitoring developments in the Middle East. Geopolitical tensions typically drive demand for safe-haven assets such as the dollar, which can offset supportive factors for regional currencies.
For Tuesday's session, the first trader projects the peso to trade between P60.55 and P60.80 against the dollar. The second trader expects a range of P60.50 to P60.90. Mr. Ricafort sees the currency trading between P61.60 and P61.80.
— Aaron Michael C. Sy
