THE PESO is expected to appreciate this week as investors await the release of July budget balance data.

The local unit closed at P48.68 against the dollar on Thursday, weakening by 10.5 centavos from its Wednesday finish, data from the Bankers Association of the Philippines showed.

Despite this, the peso was stronger by three centavos from its P48.765-per dollar close on Aug. 14. Markets were closed on Friday for Ninoy Aquino Day.

Market sentiment was affected by statements from the US Federal Reserve regarding the continued impact of the coronavirus disease 2019 (COVID-19) on the economy, said Rizal Commercial Banking Corp. Chief Economist Michael R. Ricafort.

Reuters reported that the Federal Open Market Committee, in its minutes of its July meeting, said the “substantial improvement” of the situation will be dependent on “broad and sustained” reopening of the economy.

“Noting the increase in uncertainty about the economic outlook over the inter-meeting period, several participants suggested that additional accommodation could be required to promote economic recovery…,” the minutes said.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said while domestic demand for the dollar remained muted, corporate buying affected the peso’s strength on Thursday.

“[This] week seems light in terms of data so month-end flows might play a factor in [this] week’s trading,” Mr. Asuncion added.

Another key catalyst for currency trading this week is the release of the budget balance data for July, said Mr. Ricafort.

The government posted a P1.8-billion budget surplus in June, reversing the P41.8-billion deficit a year ago, latest data from the Bureau of the Treasury showed.

In the first half of the year, the budget deficit surged 1,214% to P560.4 billion from the P42.6-billion gap in the same period of 2019. This, as pandemic-related expenses ballooned amid lower tax collections.

The July budget balance data will be released on Tuesday, Aug. 25.

For this week, both Mr. Ricafort and Mr. Asuncion expect the peso to move within P48.50 to P48.80 versus the dollar. — L.W.T. Noble with Reuters