Peso weakens as surge in virus cases poses risks to recovery

THE PESO weakened against the dollar on Monday as an Omicron variant surge in various countries weigh on economic recovery.

The local currency closed at P50.23 per dollar on Monday, slipping from its P50.04 finish on Friday, data from the Bankers Association of the Philippines showed.

The peso opened at P50.05 versus the dollar. Its weakest showing was at P50.26, while its intraday best was at P50.05 against the greenback.

Dollars exchanged rose to $1.01 billion on Monday from $933.05 million on Friday.

The local currency weakened against the dollar on the increase of new Omicron variant cases of the coronavirus disease 2019 (COVID-19), which have prompted governments to set new restrictions, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Peso [was] also weaker after the peak in Christmas holiday spending may have already been seen already, together with the conversion of OFW (overseas Filipino workers) remittances to pesos to finance the said holiday spending,” he said.

“But there may still be another round of spending towards the New Year holiday weekend, as an offsetting positive factor for the peso.”

Thousands of flights globally were canceled over the weekend due to the Omicron variant. The surge in cases has pushed countries like the Netherlands to impose new lockdowns.

The Philippines has detected its fourth Omicron case.

Mr. Ricafort added that the peso was also weaker as sentiment is still weighed by the damage from Typhoon Odette, which could slow economic growth and temporarily increase prices.

“Furthermore, reconstruction activities in hard-hit areas by Typhoon Odette could entail increased importation activities such as construction materials among others,” he said.

Economists have said that agriculture and productivity losses from the typhoon could significantly impact fourth-quarter expansion.

“The peso weakened amid growing rate hike expectations after the Fed’s preferred inflation gauge continued to increase in November,” a trader said in an e-mail.

“The local currency might depreciate further on domestic concerns over the increasing new COVID-19 cases in the past few days.”

Mr. Ricafort said the peso exchange rate could range between P50.1 to P50.3 on Tuesday, while the trader said exchange rates might move between P50.15 and P50.35. — Jenina P. Ibañez