THE PESO may continue to depreciate this week amid the impact of the coronavirus disease 2019 (COVID-19) and as markets await news on the lockdown in Luzon.
The local unit finished trading at P50.90 versus the greenback on Friday, shedding 10 centavos from its P50.80 close on Thursday, according to data from the Bankers Association of the Philippines.
The peso also weakened by 21.5 centavos from its close of P50.68 on April 8, the last trading day before the Holy Week break.
Market reaction to the recent rate cut by the Bangko Sentral ng Pilipinas (BSP) caused the weakening of the peso, according to UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion.
“The peso continued its depreciation trend in a response to the BSP’s off-cycle move to help cushion the impact of the COVID-19 pandemic to the local economy,” he said.
BSP Governor Benjamin E. Diokno announced the Monetary Board decided to slash rates by another 50 basis points, barely a month since a reduction of the same magnitude was fired off in March.
Aside from the rate cut, there was risk-off sentiment due to the contraction in China’s economy for the first quarter due to the outbreak, according to Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort.
This week, UnionBank’s Mr. Asuncion said market sentiment could be less positive as the impact of the pandemic continues to escalate.
“Do expect a weakness as the impact of the COVID-19 spread may now be obvious in economic data releases, especially pertaining to ones of March,” he said.
For his part, RCBC’s Mr. Ricafort said investors will also track developments on the lockdown.
For this week, UnionBank’s Mr. Asuncion gave a forecast range of P50.80 to P51.10 while RCBC’s Mr. Ricafort sees the peso moving within the P50.70 to P51.10 levels. — L.W.T. Noble