Peso drops on labor data

THE PESO dropped versus the dollar following the release of data showing unemployment climbed in April.

THE PESO retreated against the greenback on Tuesday following the higher unemployment rate in April, which was caused by the reimposition of lockdowns due to higher coronavirus cases.

The local unit closed at P47.72 a dollar on Tuesday, depreciating by six centavos from its P47.66 finish on Monday, based on data from the Bankers Association of the Philippines.

The peso opened Tuesday’s session at P47.65 a dollar and climbed to as high as P47.645 during the day. However, it succumbed to the dollar’s strength to close nearer to its intraday low of P47.73 against the greenback.

Dollars traded dropped to $650.7 million on Tuesday from $724 million on Monday.

The peso depreciated versus the dollar due to data showing a higher unemployment rate in April, a trader said in an email.

Preliminary results of the Philippine Statistics Authority’s April 2021 round of the Labor Force Survey released on Tuesday showed an unemployment rate of 8.7%. This was higher than the 7.1% reported in March but lower than the 17.6% jobless rate in April 2020.

In absolute terms, there were 4.138 million unemployed Filipinos in April versus the 3.441 million in March and the 7.228 million in April 2020.

National Statistician Claire Dennis S. Mapa attributed the higher jobless rate to the renewed restriction measures in Metro Manila and nearby provinces as cases surged from late March to April.

The underemployment rate — the proportion of those already working but still looking for more work or longer working hours — worsened to 17.2% in April from 16.2% in March. This translated to 7.453 million underemployed Filipinos, more than the 7.335 million in the previous month’s survey.

The latest figure was lower than April 2020’s 18.9% underemployment rate, although there were fewer underemployed Filipinos (6.398 million) as many left the labor force that time.

Another factor that may have caused the peso’s decline versus the dollar on Tuesday was market reaction to a planned global minimum corporate tax rate by the world’s wealthiest economies, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

In a landmark agreement, the Group of Seven (G7) advanced countries’ finance ministers agreed to pursue a global minimum tax rate of at least 15% and to allow market countries to tax up to 20% of the excess profits — above a 10% margin — of around 100 large, high-profit companies, Reuters reported.

In exchange, G7 countries agreed to end digital services taxes, but the timing for that is dependent on the new rules being implemented.

The deal could pave the way for broader buy-in by G20 countries and some 140 economies participating in international negotiations over how to tax large technology firms such as Alphabet, Inc.’s Google, Facebook, Inc.,, Inc. and Apple, Inc. All are expected to be included in the new, broader mechanism, which is targeted for a final international agreement in October.

For Wednesday, the trader expects the local unit to move within P47.60 to P47.80 versus the dollar, while Mr. Ricafort gave a forecast range of P47.67 to P47.77. — LWTN with Reuters