THE PESO is likely to weaken this week amid risk-off sentiment due to worries over second wave infections that could affect the economy.

The local unit closed trading at P50.195 against the dollar on Thursday, retreating by 34.5 centavos from its P49.85 finish on Wednesday, according to data from the Bankers Association of the Philippines.

It also depreciated by 39.5 centavos from its P49.80-per-dollar close on June 5.

The peso succumbed to the dollar after the grimmer economic outlook of the US Federal Reserve, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said.

“The peso exchange rate closed weaker after latest signals from the US central bank that the US economic recovery may take realistically much longer,” Mr. Ricafort said in a text message.

Fed Chairman Jerome H. Powell on Wednesday said the economic damage caused by restrictions due to the coronavirus may impede the United States’ recovery for years, Reuters reported.

Mr. Powell said they will use their tools to support the market and economy towards recovery and added they are “not even thinking about raising rates at this point”.

Aside from Fed’s latest signal, there are also heightened fears of a possible second wave of infections, a trader said.

“They’re starting to have fear for second wave of infections. So this creates risk-off sentiment,” the trader said in a phone call.

RCBC’s Mr. Ricafort said investor sentiment this week will be guided by the government’s decision on the quarantine measures to be imposed after June 15 and the spread of the virus.

“Major catalysts would include any further relaxation of lockdowns locally and the trend in local new cases,” he said.

President Rodrigo R. Duterte is expected to announce his decision related to the community quarantine today, the same day the measures imposed on May 15 are set to end.

Areas in the country are currently either under modified general community quarantine or general community quarantine.

Mr. Ricafort added that the remittance data released late Friday will likely affect market sentiment.

Cash remittances from overseas Filipino workers fell by 4.7% to $2.397 billion in March from the $2.514 billion a year ago, central bank data showed.

The 4.7% decrease is the first contraction since the -2.9% in June last year and the worst decline since the -9.8% in March 2018, which was amid high inflation and a weak P52-per-dollar level exchange rate.

The Bangko Sentral ng Pilipinas said in its latest estimates released Thursday that cash remittances will likely decline by 5% this year versus the 2% growth it forecasted in May and the baseline 3% estimate in November.

Aside from the announcement on the lockdown, the trader said investors will also track developments in the US market.

“There is already a risk-off in the US [market] because of worries about the second wave. Will this risk-off sentiment continue?” the trader said.

For this week, Mr. Ricafort said the peso could move within the P49.95 to P50.35 levels versus the dollar while the trader gave a forecast range of P50.00 to P50.50. — L.W.T. Noble with Reuters