THE PESO appreciated against the dollar on Thursday as players took positions before the release of US gross domestic product (GDP) data overnight.
The local unit closed at P58.28 per dollar on Thursday, strengthening by 14.5 centavos from its P58.425 finish on Tuesday, Bankers Association of the Philippines data showed.
The peso opened Thursday’s session slightly weaker at P58.43 against the dollar, which was also its worst showing. Its intraday best was P58.29 versus the greenback.
Dollars exchanged decreased to $1.33 billion on Thursday from $1.66 billion on Tuesday.
Philippine financial markets were closed on Jan. 29 (Wednesday) for the Lunar New Year holiday.
The peso closed higher on expectations of weaker fourth-quarter US GDP growth, the first trader said in a phone interview.
The local unit was initially weaker following the lackluster Philippine GDP data released earlier on Thursday, the trader noted. The Philippine economy grew by 5.6% in 2024, missing the government’s 6-6.5% full-year target.
“The peso appreciated from easing expectations of a US Federal Reserve rate hike as Fed Chair Jerome H. Powell dismissed such possibility,” the second trader said in an e-mail.
For Friday, the second trader said the peso could rise further on potentially weak US GDP data.
The first trader expects the peso to move between P58.10 and P58.50 per dollar, while the second trader sees it ranging from P58.25 to P58.40.
US economic growth likely slowed in the fourth quarter as imports surged and a strike at Boeing hurt spending on aircraft, though strong domestic demand will probably keep the Federal Reserve on a shallow interest rate cut path this year, Reuters reported.
The advance gross domestic product report from the Commerce department on Thursday was also expected to show consumer spending maintaining a robust pace of growth last quarter. Consumer spending is being underpinned by a resilient labor market, which is churning out solid wage gains.
While the fourth-quarter growth pace would mark a slowdown of the brisk pace notched in the July-September quarter, the economy last year defied dire predictions of a recession that had been fanned by the US central bank hiking rates by 5.25 percentage points in 2022 and 2023 to quell inflation.
The Fed on Wednesday left its benchmark overnight interest rate in the 4.25%-4.5% range, having reduced it by 100 basis points since September. It removed a reference to inflation having “made progress” toward the Fed’s 2% inflation goal.
Mr. Powell told reporters that the economy “is strong overall.” Dissatisfaction with the economy swept US President Donald J. Trump to victory in the Nov. 5 election.
GDP likely increased at a 2.6% annualized rate last quarter after accelerating at a 3.1% pace in the July-September quarter, a Reuters survey of economists showed. Estimates ranged from a 1.7% pace to a 3.2% rate.
The survey was concluded before data on Wednesday showed the goods trade deficit vaulted to a record high in December, which prompted the Atlanta Fed to slash its GDP forecast to a 2.3% rate from an earlier estimate of 3.2%.
Growth for the full year was estimated at 2.8%. The economy grew 2.9% in 2023.
The Fed has forecast only two rate cuts this year, down from the four it had projected in September, when it embarked on its policy easing cycle.
That reflected uncertainty over the economic impact of fiscal, trade and immigration policies from the new Trump administration. Economists view the planned tax cuts, broad tariffs on imports and mass deportations of undocumented immigrants as inflationary. They expect economic growth to falter by the second half and inflation to rise. — A.M.C. Sy with Reuters
