Peso to climb on expectations of slower inflation

Peso currency BW - Peso to climb on expectations of slower inflationBW FILE PHOTO

THE PESO could strengthen further against the greenback this week on the back of expectations of easing inflation and amid continued efforts from the government to stem the impact of the coronavirus disease 2019 (COVID-19).

The local unit finished trading at P50.72 versus the dollar on Friday, appreciating by 13 centavos from its P50.85-per-dollar close on Thursday, according to data from the Bankers Association of the Philippines.

The currency also appreciated by 28 centavos week on week from its P51-to-a-dollar close on March 27.

Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said the peso climbed on the back of positive market sentiment due to the government’s aid for low-income Filipinos.

“Peso was stronger after the P100-billion funding out of the P200 billion already available for the government’s COVID-19 programs especially for financial assistance to 18 million households,” Mr. Ricafort said in a text message.

In a statement on Friday, the Department of Social Welfare and Development said it started rolling out its social amelioration program under the Bayanihan to Heal as One Act. It has distributed aid in the Ilocos Region, Cagayan Valley, Central Luzon, Calabarzon, Metro Manila, Cordillera Administrative Region, and the Bangsamoro Autonomous Region in Muslim Mindanao.

Under the scheme, low-income families in Metro Manila will receive P8,000 while those living in other regions will have P5,000 in cash assistance for two months.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion noted the peso’s resilience in the past days.

“If you noticed, the peso has been holding up and has been moving within a very predictive band,” Mr. Asuncion said in a text message.

This week, the market will track local data due for release this week, according to Mr. Ricafort.

“Major catalysts include the latest inflation data as a source of major leads in the local financial market,” he said.

A BusinessWorld poll of 11 economists held last week yielded a 2.3% median estimate for March headline inflation, falling closer to the lower end of the 2-2.8% projection given by the Bangko Sentral ng Pilipinas for the month.

Analysts said a major downside risk to inflation is the drop in oil prices which will more than offset the spike in demand for food caused by the enhanced community quarantine in Luzon.

If realized, March will mark the second consecutive month of easing inflation after the 2.6% logged in February and also be lower than the 3.3% seen in the same month of 2019.

The Philippine Statistics Authority will report official inflation data on April 7.

For his part, UnionBank’s Mr. Asuncion said continued efforts by the government to contain the virus’ impact will improve market sentiment.

“If the government efforts continue to be refined and result in improvements, we may see the continuing dance of strength [in the peso] after this hammer of a virus containment policy,” Mr. Asuncion said.

Infections in the country totaled 3,094 as of Saturday, according to Health officials. Meanwhile, COVID-19 has already claimed 144 lives, while 57 recoveries have been recorded.

RCBC’s Mr. Ricafort gave a forecast range of P50.55 to P51 while UnionBank’s Mr. Asuncion sees the peso moving around the P50.70 to P51 band this week. — Luz Wendy T. Noble

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