THE PESO may continue to weaken in the coming days over continued risk aversion in the market due to the spread of the coronavirus disease 2019 (COVID-19) outside China and as markets await the release of key US data.
The local unit finished trading at P50.96 versus the dollar on Monday, shedding two centavos from its P50.94 close on Friday, according to data from the website of the Bankers’ Association of the Philippines.
A trader said that the peso’s weakness was on the back of risk-off sentiment from the market with news of more cases of COVID-19 infections recorded elsewhere around the world outside China.
“The local currency weakened as coronavirus concerns intensified after reported cases in South Korea doubled over the weekend as well as new casualties in Iran and Italy,” the trader said in an e-mail. “These reports have spooked investors over the widespread outbreak of the virus outside China.”
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also blamed the local unit’s depreciation to the developments related to COVID-19 reported on Tuesday.
“The peso was weaker amid increased global market risk aversion largely due to concerns that COVID-19’s spread could lead to volatility declines especially in emerging markets such as the Philippines,” he said in a text message.
South Korea raised its infectious disease alert to its highest level on Sunday as confirmed coronavirus cases in the country jumped. A focal point was a church in the southeastern city of Daegu, where a 61-year-old member of the congregation with no recent record of overseas travel tested positive for the virus.
South Korean health authorities said on Tuesday they aim to test more than 200,000 members of a church at the center of a surge of new coronavirus cases that has taken the country’s tally to 893.
South Korea’s fast-spreading outbreak has fueled fears that the coronavirus, which is believed to have begun in the central Chinese city of Wuhan in December, is developing into a global pandemic.
Of 60 new cases reported on Tuesday, 16 were in the southeastern city of Daegu, where the church is located, and 33 from nearby North Gyeongsang Province, the Korea Centres for Disease Control and Prevention said.
South Korea also reported its ninth death from the virus, a patient from a hospital in North Gyeongsang Province.
In Italy, new cases climbed above 220 while fatalities reached seven. Shares also dropped by more than 5%, which was the biggest daily slip in almost four years as the market worried that the disease could cause a recession.
For today, the trader said the release of some US data could affect trading.
Reuters reported that latest data from the US Conference Board showed that its consumer confidence index increased 3.4 points to a 131.6 in January, the highest reading since August.
The February consumer confidence index report will be released on Feb. 25 in the US.
For the remaining trading days this week, Mr. Ricafort said the market will continue to monitor developments in the COVID-19 outbreak, which will likely guide currency trading this week.
“Major catalyst for the peso would remain to be the developments on the COVID-19 amid continued concerns…that it could slow down global growth and amid some disruption in China’s production and some parts of the global supply chain,” Mr. Ricafort said.
From Wednesday to Friday, the trader said that the peso might move within the P50.50 to P51.20 levels while Mr. Ricafort gave a thinner forecast range of P50.80-P51.20. — L.W.T. Noble with Reuters