THE PESO may weaken against the dollar this week, with more infections of coronavirus disease 2019 (COVID-19) reported around the world and amid market volatility due to fears of the outbreak’s economic impact.
The local unit ended trading at P51 versus the dollar on Friday, stronger by seven centavos from its Thursday close of P51.07, according to data from the Bankers Association of the Philippines.
However, it weakened by three centavos from its P50.97-per-dollar close on March 20.
The peso strengthened on the back of better market sentiment due to the stimulus package in the US, an analyst said.
“Market risk appetite (improved) in view of the passage of the $2-trillion US stimulus package and after Federal Reserve Chairman (Jerome J.) Powell reassured that the Fed will never run out of ammunition in infusing liquidity,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in a text message.
Last week, the US Senate passed a law which will allot $2 trillion in stimulus package for those unemployed workers as well as industries that will be hit by the pandemic, according to Reuters.
Meanwhile, Mr. Powell said Thursday that the Fed will do whatever possible to support a vigorous rebound in the US economy.
Early last week, the Fed committed to purchase corporate bonds and backstop direct loans to companies. It said that it will also soon roll out a program to provide credit line for small and medium-sized businesses.
For his part, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said currency volatility is still being observed amid the ongoing pandemic.
“The peso slightly strengthened but the volatility is expected to continue amid the struggles against the COVID-19 pandemic,” he said in a text message.
For this week, Mr. Asuncion said currency markets will continue to track developments related to COVID-19.
“Downward pressure may be expected [this] week as the number of COVID-19 infections worldwide continue to rise and amid lingering uncertainty to global markets,” Mr. Asuncion said.
Infections in the Philippines climbed to 1,075 as of Saturday afternoon, according to the Department of Health. Deaths also rose to 68, while 35 patients have recovered.
Aside from the rise in infections, markets will monitor the government’s response to the pandemic, according to RCBC’s Mr. Ricafort.
“Major catalysts would be any proposed stimulus to fight risks related to COVID-19, especially in terms of increasing government spending,” Mr. Ricafort said.
Last week, Republic Act No. 11469 or the Bayanihan to Heal as One Act was signed into law, allowing the government to realign as much as P275 billion for its emergency subsidy program to those affected by the pandemic. Prior to this, an initial P27.1-billion stimulus program had already been rolled out by economic managers to aid affected sectors.
UnionBank’s Mr. Asuncion sees the peso moving around the P50.80 to P51.20 while RCBC’s Mr. Ricafort gave a forecast range of P50.75 to P51.15. — L.W.T. Noble with Reuters