USD/PHP Hits 18-Year High on Strong NFP

USD/PHP surged to its highest price since 2004 after the release of the Non-Farm Payrolls data sent the US dollar soaring against the Philippine peso.

The Philippine peso finished the week down 1.26% to 56.88, the weakest level against the buck in eighteen years. The peso’s weakness follows the Philippine trade balance data, which showed the trade deficit widened to a record $5.84 billion in June.

The peso is down over 13% against the dollar this year, making it the third worst performing APAC currency behind the Japanese yen and the Korean won.

But it’s not just the domestic problems weighing down the Philippine peso — the dollar’s strength is the biggest factor.

On Friday, the US Non-farm Payrolls (NFP) data came in better than expected at 315k vs. the forecast 300k. Subsequently, the odds of a 75 basis point hike at the next FOMC meeting jumped above 80%. As a result, the US dollar index is trading close to 20-year at around 109.60.

Unlike the fed, which is expected to maintain monetary tightening, the Philippine central bank is taking its foot off the gas. Philippine central bank governor Felipe Medalla told Bloomberg in August, “I think we have achieved enough, and done enough to anchor inflationary expectations.”

Doubling down on his optimistic forecast, Medalla said 6.5% gross domestic product (GDP) growth this year remains “doable”. However, USD/PHP’s reaction says the market is not so sure.

US Dollar to Philippine Peso Forecast

The weekly price chart shows USD/PHP has gone vertical. The peso has fallen over 3.25% in the last month alone, and looks set on reaching the 2004 all-time low against the dollar of 57.72.

That being said, the Relative Strength Index (RSI) shown in the lower pane, is incredibly stretched. The 79.8 reading suggests the recent rally may not be able to sustain the momentum. However, the dollar has the upper hand for now. With this in mind, we expect USD/PHP to set a record high in the coming weeks.

If our Philippine peso price prediction fails, support is seen at the 2018 high of 54.40. And below that, the 50-Day Moving Average (DMA) at 52.36 (green line) offers additional cover for the bulls.

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USD/PHP Price Chart