THE PESO may weaken this week amid continued volatility in global oil prices due to the coronavirus disease 2019 (COVID-19).
The local unit finished trading at P50.84 per dollar on Friday, shedding 17 centavos from its P50.67 close on Thursday, according to data from the Bankers Association of the Philippines.
Despite this, the currency was still up 10 centavos week-on-week compared to its P50.90 finish on April 17.
Analysts said the weaker peso came amid risk-off sentiment after the announcement of the extension of the enhanced community quarantine (ECQ).
“The peso exchange rate closed weaker after the two-week extension of the lockdown in Metro Manila and other high-risk areas which could further reduce economic activities,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion also attributed the depreciation of the local unit to the lockdown’s extension, with the market expecting this to affect the economy.
“Although some parts of the country has been placed on a lower containment grade called general community quarantine, 86.2% of the economy is still expected to be under a stricter quarantine,” he said in a text message.
The recommendation of the Inter-Agency Task Force for the Management of Emerging Infectious Diseases to extend ECQ in some high risk areas was approved by President Rodrigo R. Duterte last week.
For this week, Mr. Ricafort said market sentiment will continue to be affected by trends in global oil prices.
The pandemic has taken its toll on global oil demand which has dropped by 30% since early March because of the virus.
Meanwhile, Mr. Asuncion expects the peso to maintain its relative strength this week on the back of the country’s strong dollar reserves.
“The peso has been resilient even amid the COVID-19 pandemic… This may be due to the strong external position years even before the pandemic,” he said.
In a statement on Saturday, Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno attributed the peso’s continued resilience amid the pandemic to its “hefty” gross international reserves” and “strong economic fundamentals”.
“[T]he peso remains steady. It is the second strongest currency (next to Japan) among 14 monitored Asian foreign currencies after the COVID-19 pandemic,” Mr. Diokno told reporters in a Viber message on Saturday.
For this week, Mr. Ricafort gave a forecast range of P50.65 to P51, while Mr. Asuncion sees the peso moving around the P50.70 to P51 levels. — L.W.T. Noble with Reuters