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Peso likely to weaken

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The peso may decline versus the dollar on geopolitical tensions.

THE PESO is seen to weaken against the dollar this week following geopolitical tensions between the US and Iran as well as guidance from US Federal Reserve Bank of New York.

The local unit ended the week at P51.04 versus the greenback, down seven centavos from its previous close, following dovish pronouncements from a US Federal Reserve official.

Week on week, however, the peso strengthened from its P51.13-per-dollar finish on July 12.

In an e-mail, a market analyst said the dollar might “generally appreciate” in the first four days of the week after the New York Fed clarified that prior hawkish comments from its president John Williams were not meant to imply that there would be an aggressive US rate cut on July 31.

Mr. Williams said in a speech on Thursday that the US central bank needs to take “preventative measures” while interest rates are down and economic growth is easing than “to wait for disaster to unfold.”

“This less-hawkish confirmation might be bolstered by the upbeat US consumer sentiment for July 2019 as well as potentially firm US economic reports on manufacturing and housing,” the market watcher said.

Meanwhile, Rizal Commercial Banking Corp. economist Michael L. Ricafort said renewed tensions involving the US and Iran led to slight upward correction in global oil prices and in the dollar versus major global currencies and the peso.

On Thursday, the US shot down an Iranian drone near an American ship in the Strait of Hormuz, deepening tensions between Washington and Tehran. However, Iranian deputy foreign minister Abbas Araqchi denied the incident, saying in a tweet it didn’t lose any drone.

In another development, Iran’s Revolutionary Guards seized a British oil tanker and a Liberian-flagged ship also in the Strait of Hormuz, Mr. Ricafort said.

“Offsetting positive factor for the peso remains to be expectations about possible easing of local monetary policy by a way of a cut in local policy rates as early as the next monetary policy-setting meeting on Aug. 8,” he added.

Mr. Ricafort said a possible cut in interest rates by both the BSP and the Fed as well as easing inflation at home “have been positive for the local financial markets.”

For this week, Mr. Ricafort expects the peso to trade between P50.90 and P51.30 versus the dollar, while the market analyst gave a P50.70-P51.30 range. — Karl Angelo N. Vidal

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