The peso may rise in the Fed minutes

PESO may continue to consolidate against the dollar this week ahead of the release of the US Federal Reserve’s November meeting minutes, which could provide hints on its next move.

The Philippine Bankers Association data showed that the domestic unit closed at P57.26 on Friday, up 10 centavos from the end of P57.36 on Thursday.

Weekly, however, the domestic unit is down three centavos from the close of P57.23 on November 11.

The peso opened Friday’s trading session at 57.44 pesos to the dollar. Its weakest bid was at P57.45, while its best bid of the day was at P57.23 against the dollar.

The dollar in circulation fell to $650.18 million on Friday from $661.88 million on Thursday.

The peso strengthened on Friday after the release of the latest balance of payments data, said Rizal Commercial Banking Corp.’s chief economist, Michael L. Ricafort in a message via Viber.

The country recorded a balance of payments surplus of $711 million last month, Bangko Sentral ng Pilipinas (BSP) reported on Friday. This was down from the $1.1 billion surplus in the same month last year, but an improvement from the $2.34 billion deficit in September.

It was also the country’s largest balance of payments surplus in seven months or since the $754 million in March. fiFirst time I posted a browse since April.

The dollar/peso exchange rate has also softened after the recent decline in global commodity prices, particularly with crude oil prices at 1.5-month lows and also near 10-month lows which could help reduce the country’s import bills/trade deficit, In the future said Mr. Ricafort.

Brent crude closed at $87.62 a barrel, down $2.16, or 2.4 percent. US West Texas Intermediate (WTI) settled at $80.08 a barrel, losing $1.56, or 1.9%. Both posted weekly losses, with Brent down about 9% and WTI down about 10%.

The peso strengthened as a lower-than-expected US consumer price index sent the dollar lower, said UnionBank’s chief economist in the Philippines, Robin Carlo O. Asuncion in an email.

The US Consumer Price Index rose to 7.7% year-on-year in October, slower than the 8.2% reading in September.

A slower-than-expected inflation reading could mean the Fed can start tapering its interest rate increases as early as its December 13-14 meeting. The Fed has already raised interest rates by 375 basis points since March.

Mr. Asunción said that during this week, industry players will be watching the FOMC meeting minutes and looking for hints on the US central bank’s next move.

He added that any hawkish surprise in the FOMC minutes could be mitigated by the recent policy tightening by the BSP.

The Basic Payment Plan (BSP) last week raised the reverse overnight repo rate by 75 basis points to 5%, the highest rate in nearly 14 years. Interest rates on deposits and overnight lending facilities also increased to 4.5% and 5.5%, respectively.

The monetary board has so far raised interest rates by 300 basis points since May to curb inflation and support the peso.

In an interview with Reuters on Friday, BSP Governor Felipe Medalla said BSP would have to continue raising interest rates if the Fed tightens further next month.

“If the Fed has 50 (basis points), we can’t have zero, right? So, the question is whether it’s 25 (basis points) or 50 (basis points), Mr. Medalla said, regarding the two banks’ policy meetings. Central in December.

For the week, Mr. Ricafort has given an expected range of P57.10 to P57.50, while Mr. Asuncion expects the domestic unit to move within a wider range of P56.80 to P57.50 for the dollar. – KB Ta Asan

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