Peso may drop vs dollar on virus fears, budget data

THE PESO may continue to depreciate versus the greenback this week on rising concerns due to the local transmission of the Delta variant of the coronavirus disease 2019 (COVID-19) and ahead of the release of latest budget balance data.

The local unit closed at P50.235 per dollar on Friday, slipping by 1.5 centavos from its P50.22 finish on Thursday, based on data from the Bankers Association of the Philippines.

It also retreated by 15.5 centavos from its close of P50.08 per dollar on July 9.

The peso weakened due to risk-off sentiment after the Health department reported the local transmission of the more infectious Delta variant of COVID-19, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said.

Health Undersecretary Maria Rosario S. Vergeire on Friday said there were 16 new patients that were sick with the Delta variant. Among them, 11 were locally transmitted cases, with six detected in Mindanao.

Authorities have imposed stricter restriction measures in Cagayan de Oro and Misamis Oriental to prevent further spread of the highly infectious variant.

Another factor that caused the peso to weaken last week was Fitch Ratings’ revision of its outlook for the Philippines to “negative” from “stable,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.

Fitch last week revised its outlook for the Philippines but kept its investment grade “BBB” rating for the country. A “negative” outlook means the country could get a rating downgrade within the next 12 to 18 months.

For this week, the exchange rate could be affected by the upcoming budget deficit data, RCBC’s Mr. Ricafort said.

The Bureau of the Treasury will release its June cash operations report on Friday, July 23.

In May, the government’s budget deficit narrowed to P200.3 billion from the P202.1-billion shortfall a year earlier. However, it widened by nearly five times from the P44-billion fiscal gap in April.

For the first five months, the fiscal deficit increased by 0.7% to P566.2 billion.

Meanwhile, UnionBank’s Mr. Asuncion said rising concerns over the spread of the Delta variant in the country may continue to affect the peso.

For this week, Mr. Ricafort gave a forecast range of P49.90 to P50.40, while Mr. Asuncion expects the peso to move within a tighter band of P50 to P50.40 per dollar. — L.W.T. Noble