Peso may be range-bound as markets await Trump policies

THE PESO may move sideways against the dollar this week as the market awaits US President-elect Donald J. Trump’s inauguration for potential policy pronouncements.

The local unit closed at P58.64 per dollar on Friday, slipping by three centavos from its P58.61 finish on Thursday, Bankers Association of the Philippines data showed.

Week on week, the peso likewise depreciated by 28 centavos from its P58.36 finish on Jan. 10.

The peso consolidated against the dollar on Friday before Mr. Trump’s inauguration, a trader said in a phone interview.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message the peso-dollar pair moved sideways as markets await hints on the Trump administration’s policy stance and amid elevated global crude oil prices recently.

Policy comments from US Federal Reserve officials also caused market volatility, he added.

For this week, the trader said the peso will continue to be range-bound as global markets await the start of Mr. Trump’s second term.

The trader sees the peso moving between P54.40 and P54.80 per dollar this week, while Mr. Ricafort said it could range from P58.30 to P58.80.

The dollar held gains against the yen on Friday, but ended the week lower after a six-week winning streak, as investors await Mr. Trump’s presidential inauguration and clarity on the course of the incoming administration’s policies, Reuters reported.

The yen was poised for its strongest weekly performance in over a month as expectations for a Bank of Japan rate hike this week grow, putting the dollar on the back foot.

It climbed more than 1% against the dollar last week and touched a one-month high of 154.98 per dollar earlier on Friday.

The greenback was last up 0.68% against the yen at 156.165.

Remarks from Bank of Japan officials along with Japanese data that point to persistent price pressure and strong wage growth have helped boost market confidence that a rate shift is in the offing, with traders pricing in an 80% chance of a hike this week.

Sources also told Reuters that the central bank is likely to hike rates this week barring any market shocks when Mr. Trump takes office.

The dollar index rose on the day but showed a weekly decline after a six-week winning streak, as investors awaited the inauguration, with hopes for more clarity on policy.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.37% to 109.37.

The dollar has surged in the past few weeks on the back of rising Treasury yields, reflecting expectations that Mr. Trump’s policies could boost inflation when the US economy is already strong.

But bond markets got relief from a relentless selloff after softer US core inflation data on Wednesday, plus remarks from Federal Reserve Governor Christopher Waller on Thursday, who said three or four interest rate cuts were still possible this year if the data supported that.

This led markets to up their bets on Fed cuts this year, putting some pressure on the dollar ahead of Mr. Trump’s return to the White House.

Money markets currently price in about 40 basis points in US rate cuts in 2025.

Investors are now awaiting Mr. Trump’s inauguration speech on Monday to get a better sense of his policy steps and expecting volatility. — AMCS with Reuters