July 11, 2022

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Peso down on Fed bets after jobs data

THE PESO weakened anew against the dollar on Monday as strong US jobs data fueled bets of continued aggressive monetary tightening. — BW FILE PHOTO

THE PESO weakened slightly against the dollar on Monday on stronger-than-expected US jobs data, which could support more aggressive rate hikes from the US Federal Reserve.

The local currency closed at P55.979 versus the dollar on Monday, down by 5.9 centavos from Friday’s P55.92 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Monday’s trading session at P55.85 against the dollar, which was also its intraday best. Meanwhile, it dropped to as low as P56.035 versus the greenback.

Dollars traded went down to $804.6 million on Monday from $1.07 billion on Friday.

“The peso weakened amid firmer expectations of a 75-basis-point (bp) Fed policy rate hike this month due to strong US labor reports for June 2022,” a trader said in an e-mail.

“The peso exchange rate slightly weaker versus the US dollar today … after the generally stronger-than-expected US nonfarm jobs created that could still support more aggressive Fed rate hikes/monetary tightening,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Peso also slightly weaker after some slight upward correction on global crude oil prices, but still among two-month lows nevertheless,” Mr. Ricafort added.

The US Labor department’s survey of establishments showed nonfarm payrolls increased by 372,000 jobs last month, Reuters reported.

The Fed wants to cool demand for labor to help bring inflation down to its 2% target. Markets expect the Fed, which has increased its policy rate by 150 bps since March, to unveil another 75-bp hike at its meeting later this month.

Meanwhile, on Friday, Brent crude was up 2.3% to settle at $107.02 a barrel, while US crude rose 2% to $104.79 per barrel. However, on Monday, Brent was trading down $1.27 lower at $105.76, while US crude slipped $1.43 to $103.36 per barrel.

For Tuesday, the trader said the peso may weaken further amid the release of local trade data.

Mr. Ricafort said positive data on foreign direct investments (FDIs) released on Monday could be an offsetting factor.

Data from the Bangko Sentral ng Pilipinas (BSP) showed FDI net inflows climbed by 48.3% to $989 million in April from $667 million in the same month in 2021.

For the first four months, net inflows were at $3.4 billion, higher by 12.1% than the $3.1 billion seen in the same period last year.

The BSP expects FDI to end the year at a net inflow of $11 billion.

The trader gave a forecast range of P55.90 to P56.10 versus the dollar, while Mr. Ricafort said the peso may trade between P55.85 and P56.05. — K.B. Ta-asan with Reuters