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Peso to rise on lower imports due to lockdown

THE PESO is likely to appreciate against the greenback due to the shortened trading week and expectations of lower import demand due to the reimposed lockdown in Metro Manila.

The local unit closed at P48.49 versus the dollar on Friday, gaining nine centavos from its previous close of P48.58, data from the Bankers Association of the Philippine showed. It also strengthened by 13 centavos from its P48.62-per-dollar finish on March 19.

The peso appreciated versus the greenback on Friday on the back of market optimism amid anticipation over the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.

President Rodrigo R. Duterte’s signing of the CREATE Act was announced after the market closed on Friday. The tax reform measure will immediately bring down corporate income tax to 25% from 30% and will further slash the rate by a percentage point every year from 2023 to 2027 until it reaches 20%.

Mr. Duterte vetoed some sections of the measure, including one that allows incumbent and future presidents to exempt an investment promotion agency from CREATE’s coverage and another section that increases the threshold of low-cost housing eligible for VAT exemption to P4.3 million from P2.5 million.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said news of further stimulus in the United States was among the biggest factors that dictated foreign exchange trading last week.

For this week, Mr. Asuncion said the peso may strengthen due to a likely decline in imports amid the Holy Week holidays and the stricter lockdown in the country’s capital and nearby areas.

Mr. Duterte approved the recommendation to place Metro Manila and surrounding provinces Bulacan, Cavite, Laguna and Rizal under the tightest restriction measures starting March 29 until April 4, Presidential Spokesperson Herminio “Harry” L. Roque, Jr. said in a televised briefing on Saturday.

The announcement followed the record 9,595 new cases on Saturday which brought the country’s total to 712,442. Mr. Roque said the renewed lockdown was prompted by the diminished capacity of hospitals amid the surging cases.

Meanwhile, Mr. Ricafort said the release of February budget balance data on Monday may also affect market sentiment.

The Bureau of the Treasury will release its cash operations report for February today. In January, the fiscal gap stood at P14 billion, reversing the P23-billion surplus a year earlier due to lower tax collections and muted spending amid the pandemic.

Mr. Ricafort gave a forecast range of P48.35 to P48.60 per dollar this week while Mr. Asuncion expect the local unit to move around the P48.40 to P48.70 levels. — L.W.T. Noble

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