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THE PESO is likely to weaken further against the greenback this week as more infectious variants of the coronavirus disease 2019 (COVID-19) continue to spread.

The local unit closed at P50.08 a dollar on Friday, retreating by 20.5 centavos from its P49.875 finish on Thursday, data from the Bankers Association of the Philippines showed. This was its weakest close in more than a year or since June 23, 2020’s P50.19-per-dollar finish.

The peso also weakened by 88 centavos from its P49.20 close on July 2.

The peso weakened further following the release of the country’s trade data showing a sustained recovery in imports, which could mean increase demand for the dollar, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The country’s trade deficit stood at $2.76 billion in May, narrower than the $3.08-billion shortfall in April but still wider than the $1.31-billion gap seen a year earlier, based on data released by the Philippine Statistics Authority on Friday. Imports climbed by 47.7% to $8.65 billion in May from a year earlier. Meanwhile, exports increased by 29.8% to $5.89 billion.

Meanwhile, a trader attributed the peso’s depreciation to rising risk aversion due to new COVID-19 variants as these “could trigger outflows from the regional markets.”

A JPMorgan analysis that found emerging market economies including the Philippines, Thailand, Peru, Colombia, and South Africa are among the most vulnerable to the impact of the Delta variant due to their low vaccination rates, Reuters reported. The analysis looks at spread of the variant versus the pace of vaccination, which in some countries is not accelerating enough to offset higher rates of transmission.

COVID-19 cases in the Philippines rose by 5,675 on Saturday, bringing the active infections to 49,968. The country’s tally reached 1.391 million.

The Philippines has administered 12.489 million vaccine doses so far. but only 3.089 million people have received their second doses, equivalent to just 2.86% of the population, based on latest data from Johns Hopkins University’s vaccine tracker.

This week, investors will continue to monitor developments in the country’s COVID-19 situation and the emerging variants of the virus, Mr. Ricafort said.

He added that peso-dollar trading this week will also track upcoming remittances data.

Meanwhile, the trader said dollar bulls will continue to support the peso at the P50-per-dollar range this week.

The trader expects the peso to move within the P50 to P50.50 band versus the dollar this week, while Mr. Ricafort gave a forecast range of P49.70 to P50.30. — L.W.T. Noble with Reuters