THE peso may depreciate this week amid major data releases such as gross domestic product (GDP) and inflation, and the continued surge in coronavirus infections.

The local unit closed at P49.15 against the dollar on Thursday, gaining four centavos from its P49.19 close on Wednesday, data from the Bankers Association of the Philippines showed. The market was closed on Friday in observance of Eid’l Adha.

Week-on-week, the peso also strengthened by 18 centavos from its P49.33 finish on July 24.

The peso’s close last Thursday is its best since Nov. 11, 2016’s P48.95-per-dollar finish, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

The local currency gained “after better portfolio investments data for the month of June”, he added.

Foreign portfolio investments — also called as “hot money” due to how easily these funds enter and exit an economy – yielded a net outflow of $253.38 million in June, central bank data released Thursday showed.

This is bigger than $36.03-million net outflow in the same month last year but is the smallest since December and since the start of the virus outbreak.

Hot money yielded a net outflow of $3.3 billion in the first semester, wider than the net $721 million that fled the country in the same period in 2019.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the peso was backed by market sentiment after signals from the US Federal Reserve suggesting it will keep its dovish stance.

“Latest US Fed meeting saw the body reaffirm its dovish stance, postulating that interest rates will remain near zero for the foreseeable future citing concerns over the economy and unemployment,” Mr. Asuncion said in a text message. 

Fed Chairman Jerome J. Powell on Wednesday said they will keep interest rates near zero and promised the central bank will support the embattled US economy “for as long as it takes”, Reuters reported.

“We are not even thinking about raising rates. We are in this until we are well through it,” Mr. Powell said in a news conference. 

This week, trading will be affected by major economic data releases, the analysts said.

“Major leads include [data] on inflation and GDP,” Mr. Ricafort said.

A BusinessWorld poll of 16 economists last week yielded a median estimate of 2.6% for July headline inflation, quicker than the 2.5% in June and the 2.4% in the same month last year.

Meanwhile, a separate poll of 17 economists resulted in a median of an 11% contraction in second-quarter GDP, wider than the 0.2% drop in the first quarter and a reversal of the 5.5% growth logged in the same quarter last year.

The Philippine Statistics Authority (PSA) will release July inflation data on Aug. 5 and the second-quarter GDP report on Aug. 6.

Aside from the economic data, investors will also monitor the rise in coronavirus disease 2019 (COVID-19) cases, said Mr. Asuncion.

For this week, Mr. Ricafort gave a forecast range of P49 to P49.40 per dollar while Mr. Asuncion expects the peso to move around the P48.70 to P49.10 band. — LWTN with Reuters