Peso May Strengthen Further vs Dollar as Jobs Data Boost Fed Easing Expectations

Latest Jobs Data Strengthens Bets on Fed Slowdown

The Philippine peso may further gain ground against the US dollar, as the latest jobs data from the United States strengthened expectations that the US Federal Reserve will slow down its aggressive interest rate hikes.

The US economy added 263,000 jobs in September, below the market forecast of 275,000. The unemployment rate remained at 3.5%, matching a 50-year low.

While the job growth was slower than expected, it still suggests that the US labor market remains strong. This has led investors to believe that the Fed may not need to raise interest rates as aggressively as previously thought.

Peso to Benefit from Fed Easing

A slowdown in Fed rate hikes is positive for the Philippine peso, as it reduces the demand for the US dollar. This is because investors tend to sell pesos to buy dollars when they expect the Fed to raise interest rates, as higher rates make dollar-denominated assets more attractive.

The peso has already strengthened against the dollar in recent weeks, as expectations of a Fed slowdown have grown. The peso closed at 58.56 against the dollar on Friday, October 7, its strongest level since August 11.

Peso to Remain Volatile

While the peso is likely to continue strengthening in the near term, analysts warn that it could remain volatile, as the global economic outlook remains uncertain.

The ongoing war in Ukraine, rising inflation, and slowing growth in China are all factors that could weigh on the peso.

The Bangko Sentral ng Pilipinas (BSP) has said that it will continue to monitor the peso's movements and intervene if necessary to prevent excessive volatility.

Conclusion

The Philippine peso is likely to strengthen further against the US dollar in the near term, as expectations of a Fed slowdown grow. However, the peso could remain volatile due to the uncertain global economic outlook. The BSP will continue to monitor the peso's movements and intervene if necessary.