Peso may move sideways before key US reports

THE PESO could trade sideways against the dollar this week as markets await the release of key US economic data that could affect the US Federal Reserve’s policy path.

The local unit closed at P58.62 per dollar on Friday, strengthening by 5.1 centavos from its P58.671 finish on Tuesday, Bankers Association of the Philippines data showed.

This was a near three-week high for the peso as this was its best close since Nov. 11’s P58.595.

Week on week, the peso appreciated by 25 centavos from its P58.87 finish on Nov. 22.

The peso gained against the dollar on Friday as the greenback consolidated following its surge, which was driven by safe-haven demand due to US President-elect Donald J. Trump’s tariff threats, a trader said by phone.

The dollar was generally weaker on Friday after Mr. Trump and Mexico President Claudia Sheinbaum agreed to “maintain a good relationship,” easing global trade war concerns, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message.

The dollar eased on Friday amid prospects for firmer rates in Japan and easing in Europe, Reuters reported.

Speculation about Japanese rate hikes drove a rebound for the yen, which ended with the biggest weekly gain versus the buck since July. The dollar fell 1.25% on the day to 149.65 yen. It delved 149.46 yen in late trade, the lowest since Oct. 21, under pressure after Japan’s government finalized a stimulus budget and inflation in Tokyo came in hotter than economists expected.

The dollar index, which measures the currency against six major rivals, fell 0.26% to 105.79, ending the week 1.4% lower thanks to a sudden rebound for the euro, which had been lurching towards the key $1 marker on tariff fears and a bleak euro zone outlook

The outlook for lower US rates has also weighed on the dollar. Mr. Trump’s import tariffs could boost US inflation, Federal Reserve officials have turned cautious on rate cuts while futures traders put odds that the Fed will cut rates another 25 basis points at December’s meeting at 65%. However, for 2025 they see less chance that the central bank will continue to bring rates down at the same pace as this year.

Mr. Trump has pledged immediate 25% tariffs on all products from Mexico and Canada when he takes office in January and an additional 10% on imports from China, a major trading partner for Asian economies and euro zone export powerhouse Germany.

For this week, the trader said the market will monitor key US economic data releases, including the nonfarm payrolls, Institute for Supply Management manufacturing purchasing managers’ index, and ADP employment reports.

Mr. Ricafort added that lower global crude prices recently could support the peso.

The trader sees the peso moving between P58.50 and P59 per dollar this week, while Mr. Ricafort expects the local unit to range from P58.30 to P58.80. — A.M.C. Sy with Reuters