Peso may weaken on vaccine issues, positive US data

THE PESO may depreciate versus the dollar on Friday on increased preference for the greenback as the market expects better US economic data and with the schedule of the arrival of vaccines here still unclear.

The local unit closed at P48.605 versus the dollar on Wednesday, appreciating by 3.5 centavos from its previous finish of P48.64 versus the greenback.

The market was closed on Thursday to commemorate the anniversary of the EDSA People Power Revolution.

The peso gained on Wednesday following remarks from the US Federal Reserve that it would keep rates low to cushion the virus-stricken US economy, a trader said in an e-mail.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said Fed Chairman Jerome J. Powell’s statement which stressed the central bank’s continuous bond purchases as a quantitative easing measure during the crisis also supported the peso.

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The safe-haven US dollar languished near three-year lows versus riskier currencies on Thursday as continued dovish signals from the Federal Reserve stoked reflation bets, Reuters reported.

Mr. Powell reiterated on Wednesday that the central bank would not adjust policy until the economy is clearly improving, and would look through any near-term inflation spike.

Easy financial conditions, the promise of fiscal stimulus and an accelerating COVID-19 vaccine rollout have driven money into what’s come to be known as the reflation trade, referring to bets on an upswing in economic activity and prices.

This Friday, analysts said the peso might retreat versus the dollar on expectations of better US economic data.

“The local currency might weaken on Friday amid expectations of a stronger US durable goods report,” the trader said.

Meanwhile, Mr. Ricafort said trading will be influenced by hopes for coronavirus vaccines’ arrival in the country.

Government officials earlier said vaccines are expected to arrive by February. Vaccine czar Carlito G. Galvez, Jr. said they are willing to pay “a little higher” if only to ensure that the vaccines will arrive early, saying they now expect 5.1 doses within the first quarter.

The government is targeting to inoculate 70 million Filipinos by the end of the year.

For today, the trader gave a forecast range of P48.50 to P48.70 per dollar while Mr. Ricafort expects the local unit to move within the P48.53 to P48.63 band. — L.W.T. Noble with Reuters

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