THE PESO may depreciate versus the greenback this week as the market awaits the release of remittance data expected to show a further decline due to the fallout from the coronavirus pandemic.
The local unit finished at P49.485 per dollar on Friday, depreciating by 7.5 centavos from its P49.41 close on Thursday, data from the Bankers Association of the Philippines showed.
It however strengthened by 6.5 centavos from its July 3 close of P49.55 per dollar.
“The peso was strong for the fourth strong week. Eventually, it’s driven by the sharp slump in import,” a trader said in a phone call.
Preliminary data from the Philippine Statistics Authority showed merchandise exports in May fell 35.6% year on year to $3.99 billion. Meanwhile, merchandise imports declined 40.6% to $5.85 billion.
With this, the country’s trade deficit narrowed to $1.87 billion from the $3.65 billion shortfall in May 2019. Year to date, the trade gap shrank to $9.84 billion from the $17.79 billion seen in the first five months of 2019.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso’s day-on-day depreciation on Friday was on the back of safe haven demand after declines in the US stock market.
“The peso was weaker after the upward correction in the dollar after profit-taking in the US/global stock markets amid the latest spike in COVID-19 (coronavirus disease 2019) cases,” Mr. Ricafort said in a text message.
For this week, the trader said market sentiment on the peso will depend on the upcoming release of latest remittances data.
“March [cash] remittances is down by 4.7% and expectation is a decline much wider than that,” the trader said.
Data from the Bangko Sentral ng Pilipinas (BSP) showed cash remittances in March decreased 4.7% to $2.397 billion because of the COVID-19 outbreak and escalating tensions among global oil producers as demand slumped.
The BSP expects cash remittances to decline by 5% this year due to the worsening fallout from the pandemic, down from the 3% growth estimate it gave last year.
Meanwhile, Mr. Ricafort said major catalysts this week will be the latest data on COVID-19 infections as well as “any further government moves to ease restrictions on businesses and the economy.”
Both Mr. Ricafort and the trader expect the peso to move within the P49.30 to P40.70 levels against the dollar this week. — L.W.T. Noble