The PESO could move sideways against the dollar this week as the market reacts to key US labor data released on Friday that fueled expectations of another interest rate cut by the US Federal Reserve this month.
The local unit closed at P57.735 per dollar on Friday, up 14.5 centavos from P57.88 on Thursday, data from the Bankers Association of the Philippines showed.
This was the peso’s best finish in more than six weeks or since its close of P57.59 on October 21.
Week on week, the peso rose 88.5 centavos from its finish at P58.62 on November 29.
“The dollar weakened following the release of US jobless claims and local inflation,” a trader said by phone on Friday.
Philippine headline inflation rose to 2.5% in November from 2.3% in October, the government said last week.
Still, this was slower than the 4.1% in the same month a year ago and within the central bank’s 2.2%-3% forecast for the month.
Through the first eleven months, headline inflation averaged 3.2% over an eleven-month period, slightly faster than the BSP’s baseline forecast of 3.1% for the full year, but well within the annual target of 2-4% .
Meanwhile, the number of Americans filing new claims for unemployment benefits rose slightly in the last week of November, indicating a steadily easing situation in the labor market heading into the latter part of 2024, according to Reuters.
Initial claims for state unemployment benefits rose by 9,000 to a seasonally adjusted 224,000 for the week ended Nov. 30, the Department of Labor said Thursday. Economists polled by Reuters had forecast 215,000 claims for the past week.
The data also includes the Thanksgiving holiday, which could have added some noise to the report. The claims enter a period of volatility, which could make it difficult to get a clear picture of the labor market.
The peso also continued to be supported by the seasonal increase in remittances from overseas Filipino workers during the holiday season, said Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp. in a Viber message.
For this week, the trader said the foreign exchange market will react to the US non-farm payrolls (NFP) data released on Friday.
“Softer NFP numbers could encourage dollar selling, while a surprisingly stronger NFP could push the dollar-peso to P58,” the trader said.
The trader sees the peso fluctuating between P57.50 and P58 per dollar this week, while Mr. Ricafort expects it to fluctuate between P57.25 and P57.85.
U.S. job growth rose in November after being severely hampered by hurricanes and strikes, but a rise in the unemployment rate to 4.2% pointed to a loosening labor market that should allow the Federal Reserve to cut rates again this month, reported Reuters.
Labor market resilience is boosting the economy through strong consumer spending, with Friday’s closely watched Labor Department employment report showing solid wage growth last month. The economy created 56,000 more jobs in September and October than previously estimated.
Nonfarm payrolls rose by 227,000 jobs last month after rising by an upwardly revised 36,000 in October, according to the Labor Department’s Bureau of Labor Statistics. Economists polled by Reuters had forecast payrolls would increase by 200,000 jobs, after a previously reported increase of 12,000 in October.
Job growth averaged 173,000 per month over the past three months.
Financial markets see a roughly 89% chance of a quarter-percentage-point rate cut during the U.S. central bank’s Dec. 17-18 policy meeting, up from 72% previously, CME Group’s FedWatch tool showed. The Fed has cut rates by 75 basis points since September, when it launched its easing cycle. The policy rate is now between 4.50% and 4.75%, after being increased by 5.25 percentage points between March 2022 and July 2023. AMC Sy of Reuters