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Peso expected to weaken

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PHILIPPINE STAR_KJROSALES

THE PESO is expected to weaken against the dollar this week, with Federal Reserve (Fed) officials likely to deliver hawkish speeches amid mixed perceptions on upcoming US economic data.

On Friday, the local currency moved sideways, losing four centavos to close at P50.72 versus the dollar.

This was still better than its P50.95-per-dollar close last Nov. 17.

The first three days of last week saw the peso rally as uncertainty over the US tax reform package. However, the dollar started to correct on Thursday amid the dovish tone of the Federal Open Market Committee (FOMC) minutes.

“The dollar might continue to appreciate this week due to likely hawkish speeches from various US Federal Reserve officials,” Land Bank of the Philippines market economist Guian Angelo S. Dumalagan said in an e-mail.

He said the speeches “might continue to affirm their views of another US interest hike” in the yearend despite uncertainties over the “subdued” US inflation.

Concerns on persistently low inflation were addressed in the FOMC minutes, as several participants “expressed concern that the persistently weak inflation data could lead to a decline in longer-term inflation expectations or may have done so already.”

On Tuesday, incoming Fed chair Jerome H. Powell will deliver a speech, which the market will watch for clues on his future policy direction.

“The speech of Fed Powell on Tuesday might heavily influence markets since he is expected to succeed [incumbent] Fed [chair Janet L.] Yellen as the head of the US central bank,” he noted.

Other Fed officials expected to deliver hawkish speeches this week are Ms. Yellen, John B. Williams, Robert S. Kaplan, among others.

Meanwhile, a trader said that US economic data to be released this week might book mixed results, which could temper the effect of the speeches of several Fed officials.

“We’re looking at the US GDP (gross domestic product) growth [in the third quarter] — we can expect a pickup from last quarter,” a trader said.

Mr. Dumalagan, meanwhile, cited that US data on personal spending and personal income might “show softer readings.”

Traders expect this week that the peso will move between P50.60 and P50.90 versus the dollar, while Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, gave a wider reading of P50.50 and P51 as he expects thinner trading volume as the yearend nears. — K.A.N. Vidal

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