THE PESO is likely to strengthen this week with a rate cut possibly on the table and with inflation still manageable despite a possible uptick.
The local unit ended at P50.83 on Friday, strengthening by 13 centavos from its P50.96-per-dollar finish on Thursday, according to data from the website of the Bankers’ Association of the Philippines.
However, it was weaker by 1.50 centavos from its P50.815 a dollar finish on Jan. 24.
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said there was positive sentiment in the market, with authorities calling for a stronger response against the novel coronavirus outbreak.
“Investors can be seen as still weighing the potential short-term impact of the virus spread. However, it seemed tilted to the positive with the WHO (World Health Organization) declaration including the commendation of China’s efforts to stop the disease,” Mr. Asuncion said in a text message.
Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort also said that market worries “somewhat eased” with WHO expressing “confidence on China’s ability to control the outbreak.”
Reuters reported that China’s new confirmed infections from the coronavirus outbreak increased by a daily record, up by 2,590 cases on Saturday to top 14,000, as the quickly growing epidemic prompted global travel restrictions and evacuations.
The death toll from the coronavirus outbreak in China had reached 304 as of the end of Saturday, state broadcaster CCTV said on Sunday, citing the country’s National Health Commission.
All the new deaths and most of the new infections on Saturday were in central Hubei province, the epicenter of the flu-like coronavirus outbreak.
The WHO this week declared the outbreak of the virus — officially called 2019 novel coronavirus acute respiratory disease (2019-nCoV ARD) — a public health emergency of international concern, but said global trade and travel restrictions are not needed.
On Sunday, the Department of Health (DoH) reported the first 2019-nCoV ARD death outside of China, as another patient positive for the virus died on Feb. 1. This brought the confirmed cases in the Philippines to two.
The DoH said the first 2019-nCoV ARD fatality in the country was a 44-year-old man who traveled to the Philippines from Wuhan, China with the 38-year-old woman who was confirmed positive for the virus last week.
As of Sunday, the DoH said there are 36 persons under investigation for the virus.
Analysts said markets will continue to track both local and international developments this week.
“This week, uncertainties may still be expected due to the 2019 coronavirus outbreak,” UnionBank’s Mr. Asuncion said.
Meanwhile, RCBC’s Mr. Ricafort said factors that may affect peso trading this week will include inflation, the central bank’s decision on policy rates, as well as developments related to the coronavirus.
“Major catalysts next week include the latest inflation data on Feb. 5 and the BSP’s (Bangko Sentral ng Pilipinas) monetary policy-setting meeting on Feb. 6, as well as developments related to the coronavirus especially on measures to contain it,” he said.
BusinessWorld’s poll of 13 economists yielded a median estimate of 2.7% for January headline inflation, with analysts citing upside risks from the Taal Volcano eruption and a rise in some food prices still due to the African Swine Fever.
If realized, the reading will mark the third straight month of an uptick in inflation and will be faster than the 2.5% seen in December. However, this is still slower compared to the 4.4% pace in January 2019 and also falls closer to the lower end of the 2.5-3.3% range given by the BSP. This is also well within the 2-4% target for the year.
Meanwhile, 10 out of the 13 economists who joined the inflation poll were of the view that the Monetary Board will ease rates by another 25 basis points (bps) this Feb. 6.
BSP Governor Benjamin E. Diokno last week said the central bank is still looking to bring down rates by around 50 bps in 2020. He said a 25-bp cut could also be considered as early as this quarter.
The BSP last year cut rates by a total of 75 bps, partially unwinding the 175 bps worth of hikes implemented in 2018 to quell multi-year high inflation.
Key policy rates currently stand at four percent for the overnight reverse repurchase facility, while overnight deposit and lending rates are at 3.5% and 4.5%, respectively.
For this week, UnionBank’s Mr. Asuncion gave a forecast range of P50.70-P51, while RCBC’s Mr. Ricafort said the peso may play around the P50.60-P51 levels. — L.W.T. Noble with Reuters