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Peso inches lower vs the dollar as pandemic clouds US outlook

THE PESO weakened slightly versus the dollar on Monday following the release of latest remittances data and amid worries over the long-term impact of the coronavirus disease 2019 (COVID-19) pandemic on the United States economy.

The local unit closed at P48.225 versus the dollar on Monday, declining by 1.5 centavos from its P48.21 finish on Friday, data from the Bankers Association of the Philippines showed.

The peso opened Monday’s session stronger at P48.16 versus the greenback and peaked at P48.14 before closing at its weakest point for the day.

Dollars traded declined to $565 million on Monday from $669.1 million on Friday.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso inched down following the release of latest remittances data.

“Faster growth in OFW remittances back to pre-COVID-19 levels could fundamentally lead to pick up in consumer spending (which accounts for at least 70% of the economy) and in the overall economy,” Mr. Ricafort said in an e-mail.

Money sent home by overseas Filipino workers (OFWs) rebounded in September to log its fastest growth in more than two years as they remitted more funds to support their families back home amid the coronavirus crisis.

Cash remittances coursed through banks jumped 9.3% to $2.601 billion in September from $2.379 billion a year ago following the 4.1% decline in August, data released by the Bangko Sentral ng Pilipinas on Monday showed.

September’s year-on-year increase was the quickest since the 12.7% pace logged in April 2018.

Month on month, cash remittances also went up 4.7% from the $2.483 billion seen in August.

Meanwhile, a trader said the peso weakened versus the dollar after US Federal Reserve Chairman Jerome Powell said he is worried about the long-term impact of COVID-19 on the world’s largest economy.

The rising likelihood of an effective coronavirus vaccine is good news for the economy in coming months, Mr. Powell said on Thursday, but near-term risks remain as the COVID-19 disease continues to spread unchecked, Reuters reported.

“That is certainly good and welcome news for the medium term,” Mr. Powell said in remarks to a virtual European Central Bank forum. But “from our standpoint it is too soon to assess with any confidence the implications of the news for the path of the economy especially for the near term…The next few months could be challenging.”

And as he has for months, Mr. Powell repeated his view that more action from both the Federal Reserve and from Congress, in the form of further fiscal stimulus, will likely be needed.

Even after the unemployment rate falls further, he said, some workers will continue to need help finding jobs in what will be a changed economy. And, he said, he worries that when all is said and done, the pandemic will have damaged the economy’s long-term productive capacity.

For today, both Mr. Ricafort and the trader see the peso moving from P48.17 to P48.27 versus the dollar. — KKTJ with Reuters

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