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Peso to strengthen on RTB flows, weak dollar demand

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THE PESO may continue to appreciate this week following the record-high proceeds from the government’s retail Treasury bond (RTB) sale and amid weak demand for dollars.

The local unit finished trading at P49.041 versus the dollar on Friday, appreciating by less than a centavo from its P49.05 close on Thursday, data from the Bankers Association of the Philippines showed.

Still, the peso’s Friday close was its best in more than three years or since Nov. 11, 2016’s P48.95-per-dollar finish.

It also strengthened by 10.90 centavos from its P49.15 finish on July 30.

The peso climbed amid demand for the government’s RTB offer, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

“Recent RTB offering attracted some investors, partly supporting the peso,” Mr. Ricafort said in a text message.

The government sold a record P515.3 billion in five-year RTBs, of which P488.5 billion were fresh funds while P27.8 billion were from the switch offer, National Treasurer Rosalia V. De Leon said on Friday.

Proceeds from the transaction will be used to fund the government’s response to the coronavirus pandemic.

The peso also strengthened as the drop in the gross domestic product (GDP) was already expected by the market, said UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion.

The Philippine economy shrank by a record 16.5% in the second quarter amid the impact of the pandemic, data released by the Philippine Statistics Authority on Thursday showed. With first-quarter GDP already contracting by 0.7%, the second quarter figure meant the economy has plunged into a technical recession.

For this week, Mr. Asuncion said low demand for dollars may drive the peso up.

“Bond-related flows concerning the RTB settlement may also contribute to the upward pressure on peso,” Mr. Asuncion said.

Meanwhile, Mr. Ricafort said the fresh economic stimulus measures in the United States may also impact market sentiment.

US President Donald J. Trump on Saturday signed executive orders to partially restore enhanced unemployment payments to jobless Americans amid the ongoing crisis, according to Reuters.

The newly-signed orders will disburse an additional $400 per week in unemployment payments, smaller than the $600 per week provided in the earlier part of the crisis.

Mr. Ricafort expects the peso to move around the P48.90 to P49.20 band versus the dollar this week while Mr. Asuncion gave a forecast range of P48.85 to P49.15. — L.W.T. Noble with Reuters

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