THE PESO is seen to appreciate versus the dollar this week on the back of demand amid the extended Luzon lockdown and continued improvement in market sentiment due to stimulus measures to cushion economies from the impact of the coronavirus disease 2019 (COVID-19).

The local unit closed at P50.585 versus the dollar on Wednesday, stronger by 9.50 centavos from its P50.68 finish on Tuesday, according to data from the Bankers Association of the Philippines.

The peso also gained 29.5 centavos from its P50.88 close on April 1 and 13.5 centavos from its April 3 finish of P50.72 per dollar.

Markets were closed on Thursday and Friday due to the Holy Week holidays.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the stronger peso last week to market sentiment on the latest trade deficit data.

“Narrower trade deficit data, among the narrowest in about 2.5 years, amid the recent year-on-year declines in imports and modest growth in exports supported the recent gains of the peso,” Mr. Ricafort said in a text message.

Meanwhile, a trader said the peso gained as the central bank announced a reduction in the minimum liquidity ratio (MLR) of smaller banks.

“The strengthening was more of a continuation of the trend of peso’s strength. A little bit of risk on for us because there was a recent announcement for liquidity ratio cut for thrift banks so it’s a bit of easing so it’s a positive for peso,” the trader said in a phone call.

The Bangko Sentral ng Pilipinas (BSP) trimmed the MLR requirement for smaller banks to 16% from 20% until end-2020 in a move to boost the liquidity of thrift, rural and cooperative banks amid the extension of the enhanced community quarantine in Luzon.

For this week, Mr. Ricafort said continued positive market sentiment could drive the peso higher.

“Major catalyst include any continuation of improved global market risk appetite as seen recently in view of the record stimulus measures worldwide and unprecedented monetary easing by central banks in an effort to better deal with the economic fallout largely due to the COVID-19 outbreak and any risk of recession,” he said in a text message.

Meanwhile, the trader said the peso will remain range-bound as demand for cash persists.

“Since the lockdown is extended, liquidity is still the main factor so I think demand for peso will still be there,” the trader said.

The enhanced community quarantine in Luzon which was supposed to end by 12:00 am of April 13 has been extended by two more weeks to April 30 as the government said more time is needed to flatten the curve and to allow for mass testing, with Health officials noting that cases have yet to peak.

COVID-19 cases in the country reached 4,428 as of Saturday, with 247 casualties, according to the Department of Health. Recoveries totaled 157.

For this week, Mr. Ricafort sees the peso playing around the P50.45 to P50.85 band versus the dollar while the trader gave a forecast range of P50.45 to P50.90. — L.W.T. Noble