Peso seen to weaken further as coronavirus continues to spread
THE PESO may continue to decline this week due to the prolonged coronavirus disease 2019 (COVID-19) outbreak, although it could get some relief from the release of key local and US data.
The local unit closed at P50.64 versus the dollar on Friday, depreciating by 5.50 centavos from its P50.585 finish on Thursday, according to data from the website of the Bankers’ Association of the Philippines.
Week on week, however, the peso appreciated by 33 centavos from its P50.97-to-a-dollar close on Feb. 28.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the local currency’s weakness to continued market fears due to the prolonged spread of the virus.
“The peso exchange rate was slightly weaker, could be brought about by latest volatility in the financial market that effectively increased shift to safe havens,” Mr. Ricafort said in a text message on Friday.
Meanwhile, a trader said the peso’s weakness on Friday was a “delayed reaction” after some weak data released on Thursday.
The Philippine Statistics Authority (PSA) reported on Thursday that headline inflation in February slowed to 2.6% from the 2.9% pace in January, on the back of easing food, transport, and utility prices. This headline inflation print is closer to the lower end of the 2.4-3.2% inflation forecast range penciled by the central bank last week.
This also compares to the three percent inflation estimate from a BusinessWorld poll of 17 economists.
The PSA on Thursday also said preliminary data from the Labor Force Survey (LFS) showed the Philippine unemployment rate as of January was unchanged at 5.3% from the same period of 2019.
A closer look at the data, however, showed the number of jobless in the country went up by 106,651 to 2.39 million in January from 2.28 million in the same LFS round last year.
This week, headlines regarding the spread of COVID-19 as well as some key data will affect currency trading, according to Mr. Ricafort and the trader.
“The major factors include developments related to the coronavirus, both locally and globally, as well as the upcoming announcements on the latest Philippine trade data,” Mr. Ricafort said.
The PSA is set to release the January international merchandise trade data not later than March 12.
In 2019, the trade deficit stood at $37.05 billion, smaller than the $43.53-billion gap in January-December 2018. In December alone, the trade gap was at $2.48 million, thinning from the $4.17-billion deficit in the same month of the prior year.
Aside from the progress of the spread of the virus, the trader also said the market will factor in key US data released late last week.
“’Yung isang big thing na nakikita ko (One big thing I see) besides the virus is the nonfarm payrolls US data,” the trader said.
Reuters reported that US non-farm payrolls grew by 273,000 jobs in February to match January’s tally, which was the largest since May 2018.
On March 7, the Department of Health (DoH) declared Code Red sub-level 1 and has alerted medical professionals to be ready to report for duty after the country confirmed the fifth case of COVID-19 in the country, which is a local transmission as the 62-year-old Filipino did not have any recent travel history. His 59-year-old wife has also contracted the virus, bringing the total infections in the country to six.
“With Code Red, the DoH has recommended to the Office of the President for the declaration of a State of Public Health Emergency which will facilitate mobilization of resources, ease processes, including procurement of critical logistics and supplies, and intensifying reporting,” the DoH said in a statement.
The virus has already infected more than 100,000 around the world and killed more than 3,000.
This week, the trader sees the peso moving around the P50.50-P51 levels while Mr. Ricafort gave a forecast range of P50.50-P50.90. — L.W.T. Noble with Reuters