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Peso to strengthen further this week as budget concerns ease

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THE PESO may rise further this week as the market anticipates progress in the 2021 national budget deliberations.

The local unit closed P48.305 versus the dollar on Friday, rising by five centavos from its P48.355 finish on Thursday, data from the Bankers Association of the Philippines showed.

Week on week, the peso was stronger by 17.5 centavos from its P48.48-per-dollar finish on Oct. 2.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso strengthened last week after President Rodrigo R. Duterte asked the House of Representatives to hold a special session to approve the 2021 national budget on time.

This came after the House suspended its session on Tuesday, earlier than scheduled, as part of an ongoing speakership row. The House also approved on second reading the P4.5-trillion national expenditure plan that day.

Mr. Ricafort said progress on the 2021 national budget will boost the peso this week as this will give the market an assurance of economic stability amid the pandemic.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail that the peso will likely rise as the country produces more goods for exports to offset possible losses in remittances.

“A monthly trade shortfall of $2 billion or less due to slumping imports with fading export weakness, would ease any pressure on lackluster remittances,” he said.

For this week, Mr. Ricafort expects the peso to range from P48.15 to P48.45 versus the dollar while Mr. Asuncion sees it moving from P48.30 to P48.60.

The dollar fell to three-week lows on Friday on optimism that a deal for new US stimulus would be reached, and as investors bet that Democrat Joe Biden is more likely to win the US presidency and offer a larger economic package, Reuters reported.

US House Speaker Nancy Pelosi said she would resume talks on a possible COVID-19 stimulus package with Treasury Secretary Steven Mnuchin on Friday, while Senate Republicans voiced doubts that a deal can be reached before the Nov. 3 election.

Republican President Donald Trump, who initially withdrew from the negotiations last week only to regain interest in forging a bipartisan accord, said he was open to a larger deal.

The dollar index against a basket of major currencies fell 0.54% to 93.05, the lowest since Sept. 21, and fell below its 50-day moving average for the first time since then. It has held within a range from 91.74 to 94.75 since late July.

The euro rose 0.57% to $1.1825. The greenback weakened 0.39% against the Japanese yen to 105.60 yen.

The US currency also fell on rising expectations that Mr. Biden will win the Nov. 3 election, and that Democrats could win the Senate. A Democratic victory would likely result in larger stimulus, which would be negative for the dollar.

Rising expectations of a Biden victory has also boosted appetite for currencies that have been hurt by the trade war between Washington and Beijing, with the Chinese currency the biggest beneficiary. — with Reuters

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