THE PESO may stay at the P58 level against the dollar this week as stronger-than-expected US jobs data stoked inflation concerns in the world’s largest economy, pushing back US Federal Reserve rate cut expectations.
The local unit closed at P58.36 per dollar on Friday, strengthening by 14 centavos from its P58.50 finish on Thursday, Bankers Association of the Philippines data showed.
Week on week, however, the peso depreciated by 16 centavos from its P58.20 finish on Jan. 3.
The peso rebounded against the dollar on Friday due to profit taking as the market awaited the US nonfarm payrolls data released later in the day, a trader said by phone.
The peso was also supported by Philippine October foreign direct investment (FDI) data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
FDI net inflows grew by 50.2% year on year to $1.02 billion in October from $681 million in the same month in 2023, Bangko Sentral ng Pilipinas (BSP) data released on Friday showed.
This was the highest level since the $1.37-billion net inflow recorded in February 2024.
For the first 10 months of 2024, FDI net inflows totaled $7.679 billion, up 8.2% from the $7.096 billion seen a year prior.
The BSP expects FDI net inflows to reach $9 billion at end-2024.
For this week, the trader said the peso could weaken anew following the strong US nonfarm payrolls report.
The trader sees the peso moving between P58 and P58.50 per dollar, while Mr. Ricafort expects it to range from P58.15 to P58.65.
US job growth unexpectedly accelerated in December while the unemployment rate fell to 4.1% as the labor market ended the year on a solid footing, reinforcing views that the Federal Reserve would keep interest rates unchanged this month, Reuters reported.
The Labor department’s closely watched employment report on Friday also showed a decline last month in the number of people who have permanently lost their jobs and a shortening in the median duration of unemployment. A rise in these measures had raised concerns about labor market deterioration.
The upbeat report supported the US central bank’s cautious stance toward further monetary policy easing this year amid mounting fears that pledges by President-elect Donald J. Trump to impose or massively raise tariffs on imports and deport millions of undocumented immigrants could stoke inflation.
Nonfarm payrolls increased by 256,000 jobs last month, the most since March, the Labor department’s Bureau of Labor Statistics said. Data for October and November was revised to show 8,000 fewer jobs added than previously reported.
Economists polled by Reuters had forecast payrolls advancing by 160,000 jobs, with estimates ranging from 120,000 to 200,000.
Hiring has slowed in the aftermath of the US central bank’s hefty rate hikes in 2022 and 2023, but labor market resilience, mostly reflecting historically low layoffs, is powering the economy by supporting consumer spending via higher wages. The economy is expanding at well above the 1.8% pace that Fed officials regard as the non-inflationary growth rate.
Financial markets overwhelmingly expect the Fed to keep its benchmark overnight interest rate unchanged in the 4.25%-4.5% range at its Jan. 28-29 meeting, CME’s FedWatch tool showed. The central bank has lowered its policy rate by 100 basis points since launching its easing cycle in September. — A.M.C. Sy with Reuters
