THE PESO succumbed to the greenback on Thursday as investors sought safer havens after officials said the US economy will likely see prolonged weakness due to the coronavirus disease 2019 (COVID-19) pandemic.
The local unit finished trading at P50.445 per dollar on Thursday, shedding 18.5 centavos from its P50.26 finish the prior day, according to data from Bankers Association of the Philippines.
The peso opened the session at P50.29 per dollar, which was also its intraday best. Meanwhile, its weakest showing for the day was at P50.50.
Dollars traded increased to $565.61 million on Thursday from the $390.5 million seen on Wednesday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said there was risk-off sentiment in the market after the gradual lifting of lockdown in certain areas in the US.
“The peso exchange rate closed weaker after some concerns raised by US infectious disease officials that the reopening of the US economy might be too soon that could cause another wave of COVID-19 infections,” Mr. Ricafort said in a text message.
US National Institute of Allergy and Infectious Diseases Dr. Anthony Fauci warned that the premature lifting of lockdowns may prompt additional outbreaks of the virus, according to Reuters.
The virus has already sickened more than 4.43 million all over the world, of which 1.43 million cases are in the US.
Meanwhile, a trader attributed the peso’s weakness to safe-haven demand after comments from the US Federal Reserve on the recovery of the world’s largest economy.
“The peso weakened from safe-haven demand following downbeat remarks from US Federal Reserve Chairman [Jerome J.] Powell over likely prolonged weakness in US economic activity,” the trader said in an e-mail.
The head of the Federal Reserve warned on Wednesday of an “extended period” of weak economic growth, vowed to use the US central bank’s power as needed, and called for additional fiscal spending to stem the fallout from the coronavirus pandemic.
Mr. Powell issued his sober review of an economy slammed by a record pace of job losses and bracing for worse ahead as most US states moved toward reopening after weeks of shutdowns aimed at slowing the spread of the novel coronavirus.
Mr. Powell pointed to uncertainty over how well future outbreaks of the virus can be controlled and how quickly a vaccine or therapy can be developed, and said policy makers needed to be ready to address “a range” of possible outcomes.
The US central bank has slashed interest rates to near zero and set up a broad network of programs to ensure financial markets continue to function during the pandemic. It has also established precedent-setting lending facilities for companies and the first-ever corporate bond purchases.
For today, Mr. Ricafort gave a forecast range of P50.30 to P50.55 while the trader expects the peso to move within the P50.30 to P50.50 band. — L.W.T. Noble with Reuters