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Peso to climb on weak US data

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THE PESO is seen to strengthen against the dollar in the first few days of the week due to lukewarm US labor data and escalating trade tensions between the US and China.

Last Friday, the peso strengthened against the greenback, ending the session at P52.02 ahead of the long weekend.

Week on week, the peso also strengthened from its P52.16-per-dollar finish on March 28.

“[The dollar will likely dip] due to weaker-than-expected US labor reports and escalating trade tensions between China and the US,” Guian Angelo S. Dumalagan, market analyst at Land Bank of the Philippines (LANDBANK), said in an e-mail.

According to the Bureau of Labor Statistics, the US created 103,000 jobs in March, well below the 193,000 market expectations as well as the 326,000 non-farm payrolls reported in February.

The jobless rate stayed at 4.1% last month, below the 4% market expectation.

Despite these weaker-than-expected US labor reports, the LANDBANK market analyst noted that “average hourly earnings, which is a leading indicator of inflation, surpassed consensus estimate.”

On the other hand, President Donald J. Trump instructed officials to consider slapping $100 billion worth of duties against China, following Beijing’s imposition of new tariffs on 128 American goods including frozen pork, wine and apples.

“These negative developments are expected to weigh down on the dollar, although their impact could be temporary given that the US still remains generally on track to raising rates two more times this year, Mr. Dumalagan said.

Toward the end of the week, LANDBANK’s market analyst noted that the dollar might recover from its initial fall as it will be supported by potentially upbeat inflation data and the release of the US Federal Reserve minutes.

“Prices on both the producer and consumer sides are expected to pick up in March 2018, aligned with the better-than-expected increase in average hourly earnings,” he said, adding that these suggests that the US inflation is inching closer toward the Fed’s target and that the tightening of the US labor market is staring to exert upward pressure on prices.

During the March meeting of the Federal Open Market Committee (FOMC), the Fed officials have upgraded their outlook on the American economy, suggesting a steeper path of rate adjustments until 2020.

“The FOMC minutes might provide additional details on these hawkish views, affirming widespread beliefs of at least two more rate hikes in 2018,” added Mr. Dumalagan.

For this week, Mr. Dumalagan expects the peso to trade between P51.65 and P52.35, while a foreign exchange trader said the peso will move from P51.90 to P52.15 as markets reopen today. — Karl Angelo N. Vidal