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Peso to move sideways amid mixed US reports

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THE PESO will likely move sideways against the dollar this week as market players expect US economic data due for release to be mixed.

On Friday, the peso ended its rally as it lost 10 centavos to close at P50.37 versus the greenback.

Still, this was better than its P50.72-per-dollar close last Nov. 24.

“The dollar might move sideways, with an upward bias, this week amid likely mixed US economic reports,” Land Bank of the Philippines market economist Guian Angelo S. Dumalagan said in an e-mail.

Soft US reports on trade balance and non-manufacturing are expected to dampen the positive developments on the American tax reform plans in the first three days of the week.

Meanwhile, data on ADP employment, non-farm payrolls, average hourly earnings and joblessness are seen to be upbeat, which may prompt the dollar to correct on Thursday.

Mr. Dumalagan added that the strong performance expected for the peso in the first days of the week will by pushed by the political noise in the US.

Former national security adviser Michael T. Flynn said he is prepared to testify against US President Donald J. Trump, admitting that Mr. Trump directed him to make contact with the Russians during the presidential campaign.

This was part of his plea bargain as he admitted lying to the Federal Bureau of Investigation on Friday.

Meanwhile, another trader noted that the ascent of peso might be tempered by the weak performance of the local bourse.

“December is noted as a month where foreign [corporates] repatriate their income back to their home countries,” the trader said, adding that the strong remittances brought by seasonal flows might not be strong enough to reverse the effects of weaker stocks.

Another trader said market players will also look at the local data on November inflation due for release tomorrow.

Inflation likely steadied in November from the previous month amid higher fuel costs and electricity rates, the Bangko Sentral ng Pilipinas (BSP) said, although a stronger peso could have eased price pressures.

Price increases for widely used goods and services likely logged between 2.9-3.6% last month, the BSP’s Department of Economic Research said in a statement last week.

This assures that inflation will remain within the midpoint of the central bank’s 2-4% target band, and could even trend lower than the October’s 3.5% print which was the fastest in three years.

“Higher domestic petroleum prices and electricity rates in Meralco-serviced areas could contribute to upward price pressures, which could be partly offset by the slightly stronger peso for the month,” the BSP said.

Also last week, the Finance department said it is expecting inflation to have eased to 3.2% last month as food prices stabilize after weather disturbances.

For this week, traders expect the peso to move within P50.20 to P50.60, while Mr. Dumalagan gave a wider range of P50.15 to P50.65, as he noted that higher-than-expected inflation data could increase chances of a rate hike by the central bank. — Karl Angelo N. Vidal

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