THE PESO may depreciate further versus the greenback this week as the market waits for clearer signs from the US Federal Reserve on its policy normalization and amid rising concern on the spread of the more contagious Delta variant of the coronavirus disease 2019 (COVID-19).
The local unit closed at P50.34 per dollar on Friday, losing 20.5 centavos from its P50.135 finish on Thursday, data from the Bankers Association of the Philippines showed.
The peso also weakened by P10.5 centavos from its P50.235-per-dollar close on July 16.
The peso weakened due to preference for the dollar amid rising concerns over the local transmission of the Delta variant, which resulted in the tightening of restriction measures, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.
Metro Manila and some provinces on Friday were put under general community quarantine “with heightened restrictions” until July 31 to prevent the further spread of the highly infectious Delta variant.
The country’s travel ban on countries with rising cases of the variant has also been expanded to include Malaysia and Thailand.
The Health department on Saturday reported 17 new cases of the Delta variant, with 12 of which said to be local cases and one a returning overseas Filipino. The other four cases are still being verified. Three of these newly reported Delta variant cases are said to be active, while 14 have recovered.
The country now has a total of 64 Delta variant cases.
Heightened corporate demand for the dollar last week also pulled the peso down, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.
For this week, Mr. Ricafort said the peso could weaken further as investor sentiment could take a hit from the increase in COVID-19 infections amid the local transmission of the Delta variant.
Mr. Asuncion said the market will also monitor the Federal Open Market Committee’s meeting on July 27-28 for clues on the timing of the tapering the Fed’s pandemic-driven asset purchases.
The Fed in June kept policy rates near zero to support economic recovery but said interest rate hikes may come as soon as 2022 or 2023, earlier than what was previously signaled.
For this week, Mr. Ricafort gave a forecast range of P50.05 to P50.45 per dollar, while Mr. Asuncion expects the peso to move within a stronger band of P50 to P50.40. — L.W.T. Noble