The peso could strengthen and return to P57 levels on weak US jobs data

The PESO could continue to strengthen this week and return to the P57 level against the dollar, following a weak US jobs report and ahead of the July Philippine release inFfacts.

The local unit ended at P58.08 per dollar on Friday, up 25.3 centavos from Thursday’s P58.333, data from the Bankers Association of the Philippines showed.

This was the peso’s best performance in more than two months or since its closing rate of P57.97 per dollar on May 28.

Week on week, the peso also strengthened by 27 centavos from its closing rate of P58.35 on July 26.

“Asian currencies have appreciated against the dollar, driven by growing dovish sentiment toward the U.S. Federal Reserve’s monetary policy. This shift in market expectations follows the release of weak US economic data, leading investors to price in additional Fed rate cuts. The currency pair therefore experienced significant selling pressure,” Security Bank Corp. Chief Economist Robert Dan J. Roces said. in a Viber message.

The peso was also supported by the continued appreciation of the Japanese yen against the dollar after the Bank of Japan unexpectedly raised interest rates at its meeting last week, said Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp. in a Viber message.

The dollar fell on Friday as investors feared U.S. payroll data could be weak after an unexpected slump in manufacturing raised concerns about a slowdown in the world’s largest economy and lifted traditional safe-haven currencies, Reuters reported.

The yen strengthened, sending the dollar down 0.2% to 149.04, building on gains in the wake of a Bank of Japan decision to raise interest rates and rising to 148 for the first time since mid-March. 51.

The dollar fell 0.3% against a basket of other major currencies to trade at 104.06.

Friday’s US jobs report, released after Asian trading, showed job growth slowed more than expected in July and the unemployment rate rose to 4.3%, signaling possible weakness in the labor market and greater vulnerability to a recession.

Markets were already shaken by bleak earnings updates from Amazon and Intel and Thursday’s softer-than-expected U.S. factory activity survey, in addition to the monthly U.S. nonfarm payrolls report, which showed job growth in July fell to 114,000 new hires from 179,000 in June.

The figures raised expectations that the Federal Reserve will implement several interest rate cuts this year, which last week opted to leave interest rates unchanged.

The Fed has kept borrowing costs at a 23-year high of 5.25%-5.5% for a year, and some analysts believe the world’s highestFThe lucrative central bank may have kept monetary policy tight for too long, risking a recession.

Money markets rushed Friday to assess a 70% chance that the Fed, already widely expected to cut rates from September, would make a massive 50 basis point cut next month to ensure against a recession.

For this week, Mr. Roces said the U.S. jobs report will be the main driver of currency trading.

“This crucial economic indicator is likely to provide further insight into the health of the US labor market and potentially strengthen or challenge current market expectations regarding the Fed’s future policy decisions,” he said.

The release of Philippine inflation data for July will also influence the peso’s movement against the dollar this week, Mr. Ricafort added.

a Business a poll of 15 analysts last week yielded an average estimate of 4% for the consumer price index in July. This matches the lower end of the Bangko Sentral ng Pilipinas (BSP) forecast for the month.

If realized, in JulyFGrowth would be faster than the 3.7% in June, but slower than the 4.7% a year earlier.

It would also be the eighth straight month in which inflation remained within the BSP’s annual target of 2-4%.

The Philippine Statistics Authority will make this announcement soonFdata on Tuesday (August 6).

Mr. Ricafort expects the peso to move between P57.80 and P58.30 per dollar this week. — AMC Sy of Reuters