Stronger peso as market expects first quarter economic growth

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THE peso could strengthen against the greenback this week as analysts await the release of Iffirst quarter economic growth data, although it might be offdefined by risk-off feeling in front of offisocial election results.

The local unit closed at P52.50 to the dollar on Friday, 11.5 centavos weaker from its finish of P52.385 on Thursday, based on data from the Philippine Bankers Association.

It also lost 31 centavos from its P52.19 close a week earlier.

The peso opened Friday’s session at 52.48 pesos. Its weakest display was at its close of P52.50, while its intraday best was at P52.44.

Traded dollars fell to $878.5 million on Friday from $907.5 million on Thursday.

The peso weakened on broader trade deficit data, the chief economist at Rizal Commercial Banking Corp said. Michael L. Ricafort in a Viber message.

Data released by the Philippine Statistics Authority showed the trade deficit nearly doubled to $5 billion in March from a gap of $2.759 billion a year earlier. This was driven by the 27% growth in imports to $12.175 billion, while exports also rose 4.9% to $7.171 billion.

The trade deficit for the first three months of the year reached $13.892 billion, higher than the gap of $8.345 billion in the same period of 2021.

Mr. Ricafort said there were also risks-off sentiment in the market on Friday, as it was the last trading day before the national elections on Monday May 9.

Meanwhile, Chief Economist of UnionBank of the Philippines, Inc. Ruben Carlo O. Asuncion said the faster-than-expected inflation rate also caused the peso to weaken last week.

Headline inflation accelerated to a three-year high of 4.9% in April, driven by soaring food and energy prices. This is already beyond the 2-4% target set by Bangko Sentral ng Pilipinas and also faster than the median estimate of 4.6% from 17 analysts in a Business world survey.

Asuncion said the market will be on the lookout for first-quarter economic growth data this week as it could strengthen the case for a rate hike on the Bangko Sentral ng Pilipinas (BSP). The Philippine Statistics Authority will release preliminary gross domestic product (GDP) data for the January-March period on May 12, Thursday.

A Business world poll of 17 analysts gave a median estimate of 6.7% in the Iffirst trimester. If this materializes, it would mark the fourth consecutive quarter of annual economic expansion, but is slower than the 7.8% growth in the fourth quarter of 2021.

Economists said Omicron’s surge in January, as well as the impact on spending from rising commodity prices caused by the war in Ukraine, likely slowed economic growth in the Iffirst trimester.

BSP Governor Benjamin E. Diokno said policymakers may consider a rate hike at their June 23 meeting, taking into account that economic growth is more entrenched, as evidenced by data on the GDP and unemployment.

Meanwhile, Mr. Ricafort said the market will be on the lookout for the results of the national election.

Former Sen. Ferdinand R. Marcos Jr., the late dictator’s son, is still the frontrunner for the presidency based on the latest round of polls. However, Vice President Maria Leonor G. Robredo, the second-highest candidate for the job, is seen as more favored by the market, according to a Bloomberg poll of analysts.

The market is closed on Monday due to the special holiday decreed for the national elections.

For this week, Mr. Ricafort gave a forecast range of P52.30 to P52.60 per dollar, while Mr. Asuncion expects a stronger band of P52 to P52.50. — Luz Wendy T. Noble

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