Peso weakens as infrastructure spending increases

The peso weakened on Friday after a pickup in infrastructure spending was interpreted by traders as an increase in dollar outflows caused by expanded raw materials and capital equipment imports. 

According to the Bankers Association of the Philippines, the peso closed at ₱47.945 against the dollar Friday and ₱47.94 on Thursday. It opened at ₱47.85 with a low of ₱47.93 and a high of ₱47.84.  Week-on-week, the peso retreated from its ₱47.81 close on May 14.

Dollar volume was $941.25 million on Friday, against $979.8 million a day before.  

The government increased infrastructure spending in the second half of 2021, intended as a key driver of economic recovery. 

“The associated capital outlays could affect the peso’s performance because they will lead to outflows of foreign currency. However, an offsetting positive was the decline in crude oil prices in anticipation of a lifting of sanctions against Iranian, thereby reducing the Philippines’ oil import bill,” said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

It is believed that the market retains an overhang from an impending move by the Federal Reserve to possibly taper its asset purchases. 

Mr. Ricafort gave a forecast range of ₱47.88 to ₱47.98 for Monday, with the range for the week at ₱47.75 to ₱48.05.

SOURCE: Business World