Peso likely to go up vs dollar

THE PESO may continue to appreciate against the greenback this week ahead of the release of latest data on remittances and budget deficit.

The local currency closed at P48.455 per dollar on Friday, stronger by 4.5 centavos than its P48.50 finish on Thursday, data from the Bankers Association of the Philippines showed. Week on week, the peso likewise climbed by 10.5 centavos from its P48.56-per-dollar close on March 5.

The local unit closed stronger on Friday after latest data showed a worse contraction in goods imports in January, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said.

For this week, the peso is expected to appreciate further as the market awaits the scheduled releases of major economic reports this week such as the latest fiscal deficit, overseas Filipino workers’ remittances, and balance of payments (BoP) data, he said.

The Bureau of the Treasury will release on Monday, March 15, the January cash operations report containing the latest deficit data. Meanwhile, the central bank is set to report remittances data for January and the February BoP position on Monday and Friday, respectively.

The budget deficit rose by a fifth to P302.6 billion in December, bringing the 2020 tally to a P1.371-trillion gap, more than double the P660 billion in 2019. Last year’s deficit was equivalent to 7.63% of the country’s economic output, the highest on record.

Meanwhile, cash remittances slipped by 0.8% in 2020 to $29.903 billion from $30.133 billion the year prior. This was the first annual contraction since 2001’s 0.3% decline.

On the other hand, the country posted a $752-million BoP deficit in January following 11 straight months of surfeit. Year on year, this was smaller than the $1.355-billion gap in January 2020.

The dollar will likely continue to weaken this week as the market reacts to the newly signed $1.9-trillion stimulus in the United States that aims to support the recovery of the world’s largest economy, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.

RCBC’s Mr. Ricafort added that investors will continue to monitor the country’s coronavirus case count, progress on a proposed law that would lower the corporate income tax, and the government’s vaccination program.

Mr. Ricafort expects the peso to range from P48.30 to P48.60 versus the dollar this week, while UnionBank’s Mr. Asuncion sees it settling within P48.28 to P48.43 against the greenback. — B.M. Laforga