Philippine peso bears brunt of optimism about US economy

The Philippine peso is bearing the brunt of better prospects for the US economy that is fueling the dollar’s overall strength against most currencies.

A dollar bought P52.58 on Monday, compared with P52.55 on Friday, according the Bankers Association of the Philippines’ Foreign Exchange Summary of trading on the Philippine Dealing System.

“Now, there is optimism about the US economy because of better US jobs data,” said Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines.

US job growth accelerated in May and the unemployment rate dropped to an 18-year low of 3.8 percent, according to a report by Reuters.

The strong employment report added to a string of upbeat economic data, including consumer spending, industrial production and construction spending, the report said.

“Prospects of a US rate hike in June and the good jobs numbers last Friday” is driving the dollar stronger these days, said Jonathan Ravelas, chief market strategist at BDO Unibank.

Analyst see the Fed giving in to inflationary pressures from recent economic data by coming up with another increase in the Federal funds rate.

The market is also anticipating for the Philippines’ May inflation data to be released by the statistics office on Tuesday.

“Faster inflation tends to lead to higher interest rates—policy rate hike that supports the sentiment in favor of the peso,” said Michael Ricafort, head of Economics at Rizal Commercial Banking Corp.

“However, higher inflation alone fundamentally weighs on the peso in the absence of a corresponding upward adjustment of interest rate,” he said. —VDS, GMA News