THE PESO may continue to weaken this week with markets following developments related to the spread of the coronavirus disease 2019 (COVID-19) outside China and as they factor in key local data to be released this week.

The local unit finished trading at P50.97 versus the dollar on Friday, shedding 15.50 centavos from its Thursday finish of P50.815, according to data from the website of the Bankers’ Association of the Philippines.

Week on week, the currency also depreciated by three centavos from its P50.94-per-dollar close on Feb. 21.

Analysts attributed the weaker local unit to risk-off sentiment in the market amid fears due to new cases of the COVID-19 outside China.

“The peso seems to be tracking global markets again as fears continue to heighten with fresh evidence that COVID-19 is spreading outside China,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a text message.

South Korea reported 376 new confirmed coronavirus cases on Sunday, raising the country’s total number of infections to 3,526, the Korea Centers for Disease Control and Prevention said.

Several cases and deaths have also been reported in other countries in Europe, Middle East and in the United States.

In China, infections rose by 573 on Feb. 29 which is the highest daily increase in a week, from 427 new cases on Feb. 27, according to the National Health Commission on Sunday. Nearly 99% of the new cases were concentrated in Wuhan.

Meanwhile, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort noted that market worries have caused a sell-off in many parts of the world.

“The peso exchange rate weakened today to close at the weakest in a month amid latest declines in the stock market [and] continued global risk aversion amid lingering concerns that the coronavirus…that caused further sell-off in riskier assets worldwide such as global stock market and in other emerging markets,” he said in a text message.

For this week, the peso’s movement will depend on the market’s reaction to developments related to COVID-19 as well as the release of some local data, according to analysts.

“The local currency is still expected…to be resilient as the coronavirus continue to wreak havoc on market sentiments worldwide,” UnionBank’s Mr. Asuncion said.

RCBC’s Mr. Ricafort also cited the coronavirus as a major catalyst for peso movement this week as markets monitor its “effects on the riskier assets such as the global stock markets.”

“The markets will also take cue on the latest inflation data due on March 5, as a source of new leads.”

A BusinessWorld poll of 17 economists yielded a median estimate of three percent for February headline inflation, which is within the upper end of the 2.4-3.2% forecast range given by the Bangko Sentral ng Pilipinas (BSP).

If realized, the print will be slightly quicker than the 2.9% logged in January but still slower compared to the 3.8% in February 2019. The BSP targets 2-4% headline inflation for the year, forecasting an average of 2.9%.

UnionBank’s Mr. Asuncion sees the peso moving within P50.70-P51 agains the dollar this week, while RCBC’s Mr. Ricafort expects the local unit to end within the P50.80-P51.20 levels. — Luz Wendy T. Noble with Reuters

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