THE peso is expected to extend its gains this week ahead of the release of key economic data on the country’s balance of payments (BoP) and budget deficit.

The local unit ended trading at P49.44 versus the dollar on Friday, appreciating by 9.5 centavos from its P49.535 finish on Thursday, data from the Bankers Association of the Philippines showed.

It also gained 4.5 centavos from the P49.485 close on July 10.

Analysts attributed the peso’s appreciation to the latest affirmation of the country’s credit rating.

“The peso got a boost from Moody’s [Investors Service] reaffirmation of the Philippines Baa2 with a stable outlook rating,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a text message.

Moody’s on Thursday kept the Philippines’ sovereign credit rating at Baa2, a notch above the minimum investment grade, saying the country’s strong fiscal position developed in recent years will protect it from the impact of the coronavirus crisis. The Baa2 rating was given in December 2014.

The credit rater also assigned a “stable” outlook to the rating, suggesting this will be maintained over the next six months to two years.

Aside from the rating affirmation, improvement in US economic data also backed investor risk appetite, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

“[There was] improved global market risks appetite that reduced demand for safe haven investments amid improved US economic data such as retail sales,” Mr. Ricafort said in a text message.

Data released by the US Labor Department on Thursday showed retail sales grew 7.5% in June following the 18.2% in May. The 7.5% growth is faster than the 5% estimate in a Reuters poll of economists.

Core retail sales, which exclude automobiles, gasoline, building materials and food services, also picked up 5.6% in June after the 10.1% growth in May.

Mr. Ricafort said local data releases may affect market sentiment this week.

“Major leads include upcoming Philippine economic data including BoP and budget deficit,” he said.

June balance of payments data will be reported on July 20. Data from the Bangko Sentral ng Pilipinas showed the country’s May BoP position was at a surplus of $2.431 billion, its fourth successive month in surfeit. It is also bigger than the $928-million surplus a year ago and the $1.666 billion surfeit in April.

On the other hand, the June budget balance report will be released on July 22. The government’s budget balance stood at a deficit of P202.1 billion in May, a reversal of the P2.6-billion surplus a year ago but slimmer than the P273.88-billion budget gap in April.

Meanwhile, Mr. Asuncion said the peso is likely to stay within its “sub-50 level with Q2 GDP (gross domestic product) growth data still to be released in early August”.

The economy contracted by 0.2% in the first quarter due to the Taal volcano eruption and the early part of the Luzon lockdown. Second-quarter GDP likely logged a deeper contraction due to the strict lockdown during that period.

For this week, Mr. Asuncion said the peso will move around the P49.40 to P49.70 while Mr. Ricafort gave a forecast range of P49.30 to P49.60. — L.W.T. Noble with Reuters