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Peso weakens on oil, remittances

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THE PESO weakened against the greenback on Friday after the latest correction in oil prices and the slower growth in cash remittances in February.

The local unit finished trading at P50.76 per dollar on Friday, weakening by 31.5 centavos from its P50.445 close on Thursday, according to data from the Bankers Association of the Philippines.

Week on week, it also shed 34 centavos from its close of P50.42 last May 8.

The peso opened the session at P50.76 per dollar, which was also its weakest showing for the day. Meanwhile, its intraday best was at P50.46 against the greenback.

Dollars traded rose to $849.9 million from the $565.51 recorded on Thursday.

The local unit’s depreciation came after correction in global oil prices, according to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

“The peso closed weaker after the latest increase in global oil prices to near 1.5 month highs amid record output cuts,” he said in a text message.

Reuters reported that oil prices continue to mark gains after crude demand starts to recover in China amid easing of curbs to prevent the virus spread.

Brent crude was up 39 centavos, or 1.3% at $31.52 a barrel by 0333 GMT on Friday, after rising nearly 7% on Thursday. The global benchmark is going further for a 1.8% gain on the week after rising for the previous two weeks.

Moreover, West Texas Intermediate (WTI) oil was up 19 centavos, or 0.7%, at $27.75 a barrel. WTI is heading for a third weekly increase, up more than 12%.

These higher prices came amid supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers as well as the higher demand specifically in China.

Meanwhile, cash remittances rose by 2.6% to $2.358 billion in February from the $2.648 billion seen a year ago, according to data from the Bangko Sentral ng Pilipinas. This is slower compared to the 6.6% pace seen in January.

On the other hand, a trader said the peso’s weakness came after risk-off sentiment following US data on job claims.

“The peso depreciated following the stronger-than-expected US initial jobless claims report overnight which elevated concerns over persistent weakness in the US labor market,” the trader said in an email.

A US Labor Department report on Thursday showed that initial claims for state unemployment benefits amounted to a seasonally adjusted 2.981 million for the week ended May 9.

This is in comparison to the 2.5 million applications forecasted by Reuters. The higher-than-expected number was partly boosted by Connecticut, which incorrectly reported data for last week. — L.W.T. Noble with Reuters

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