Peso claws back losses to return to P57:$1

Manila, Philippines – The peso has clawed back some of the previous week’s sharp losses against the US currency on Friday to return to the P57-per-dollar exchange rate for the first time in seven sessions.

Week-on-week, the peso appreciated to P57.875, a gain of 0.39 percent but not enough to match or wipe out weekly losses as deep as 1.8 percent that earlier sent it tumbling to P58.196 against the greenback.

The local currency’s rebound, however, has no legs. Friday’s gains were anchored on the temporary shift in global attention to the US partial government shutdown that traders said historically corresponded with a weaker dollar.

Domestic uncertainties are keeping investors on edge, and further damping sentiment were the back-to-back natural calamities of a large magnitude quake in Cebu and seismic activity of Taal Volcano.

“Peso traded in a choppy and volatile fashion this week as markets navigated a mix of domestic and external uncertainties,” FX analysts from BDO’s research unit said in a note to investors on Friday.

“Local sentiment was weighed by recent natural disruptions, including the Cebu earthquake and heightened activity around Taal Volcano, while global attention focused on U.S. partial government shutdown and its implications for economic data releases,” the note read.

Also supporting the peso were markets adjusting dollar positions as investors fret over a delay in US labor data, it added.

Traders’ outlook for next week is less sanguine.

“Peso is likely to remain volatile as markets await clarity on corruption probe and developments surrounding U.S. government shutdown,” the BDO note read.

“With shutdown delaying key U.S. economic data, investors may look to Fed commentary and domestic indicators for direction,” it added.

Expect major releases next week, including the September inflation reading and the Bangko Sentral ng Pilipinas’ interest rate decision.

“Against this backdrop, risks remain tilted toward renewed weakness if local uncertainties persist,” BDO’s research unit said.