Peso expected to weaken vs dollar as focus turns to vaccines

THE PESO will likely weaken against the greenback this week on risk-off sentiment due to the recurring delay in vaccine delivery, which is seen dimming prospects for the country’s recovery, as well as expectations of quicker inflation.

The peso closed at P48.59 versus the dollar on Friday, appreciating by 1.5 centavos from its P48.605 finish on Wednesday, based on data from the Bankers Association of the Philippines.

However, the local unit weakened by 13.9 centavos from its close of P48.451 a week earlier.

The peso appreciated on Friday following the “hot money” data released by the Bangko Sentral ng Pilipinas (BSP), Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.

Foreign portfolio investments yielded a net inflow of $97.92 million in January, reversing the $486.1 million in net outflows seen a year ago as well as the net $1.607 billion that left the country in December.

The BSP identified key events during the month such as the shift to the new US administration which may have caused risk-off sentiment in the market.

For this week, Mr. Ricafort said the market will be on the lookout for the arrival of COVID-19 vaccines and the start of the government’s inoculation program.

Sinovac vaccines donated by the Chinese government were expected to arrive on Sunday. The doses were originally expected to be delivered earlier in February.

Presidential Spokesperson Herminio “Harry” L. Roque on Saturday said more than 526,000 doses of AstraZeneca doses are also expected to be delivered on Monday. 

Meanwhile, a trader said expectations of faster inflation may weaken the local unit this week.

A BusinessWorld poll of 16 economists yielded a median estimate of 4.8% for February inflation, closer to the upper end of the 4.3% to 5.1% estimate of  the central bank. If realized, it will be the second straight month of headline inflation breaching the 2-4% target following the 4.2% print in January.

Analysts said upside risks during the month likely came from higher prices of meat and fish as well as oil price hikes.

For this week, Mr. Ricafort gave a forecast range of P48.40 to P48.70 per dollar while the trader expects the local unit to move within the P48.45 to P48.65 band. — L.W.T. Noble