THE peso moved sideways on Friday on the back of a “disappointing” US-China phase one trade deal and as big data releases next week pushed investors to the sidelines.
The peso closed at P50.891 against the dollar yesterday, weakening by 6.1 centavos from its Thursday finish, according to Bankers Association of the Philippines website.
It opened at P50.87, peaking at P50.81 per dollar. The intrasession low was P50.98.
Meanwhile, the total volume of dollars traded yesterday picked up to $1.300 billion from $1.224 billion recorded the previous day.
Asked to comment, a bond trader said this was mainly due to a “disappointing” phase one trade deal between US and China signed Wednesday.
“I think there’s a little bit more disappointment that there wasn’t more clarity to some parts of the deal. Moving forward now, that there are questions for the phase 2 deal.”
Reuters reported that the deal includes a reduction of US tariffs on Chinese goods in exchange for China’s commitent to buy more US farm, energy and manufactured goods and address complaints about intellectual property protections.
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the expected release of fourth quarter gross domestic product (GDP) data next week pushed investors to the sidelines.
“2019 Q4 GDP data release may strengthen the peso with expected robust results,” he said in a phone message.
The Philippine Statistics Authority (PSA) will report the official data fourth quarter GDP on January 23, Thursday, along with the full-year reading for 2019 and the revised third quarter GDP data.
Meanwhile, the first trader added that while the US central bank will likely hold interest rates steady this year, benchmark policy rates may still decline following Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno signalling a 50 basis point (bp) reduction within the year, which will likely push peso in an “upward direction.”
Reuters reported that Federal Reserve Board member Michelle Bowman said Thursday that the Fed’s current policy rates “remain appropriate this year” given that upcoming data will be “remain broadly consistent.”
Ms. Bowman said the US economy is still “in a good place.”
Mr. Diokno said in December last year that tmonetary authorities could consider a 50-bp reduction in 2020, which if realized, will partially reverse the 175-bp hike it effected in 2018 in response to high inflation levels. — Beatrice M. Laforga