Peso appreciates to P56-level

by Lee C. Chipongian, MB

The peso strengthened vis-à-vis the softer US dollar on Wednesday, Nov. 23, at P56.94, appreciating by P0.43 from its close of P57.37 the day before.

This is the first time the peso was back at the P56-level since the first week of July this year.

Based on Bankers Association of the Philippines data, the peso closed at its strongest on Wednesday, after hitting a low of P57.33, but still better than the previous close.

PH peso/Manila Bulletin article photo

The spot market’s weighted average rate was P57.203 versus P57.394 last Tuesday. Total volume stood at $687.85 million from $684.40 million.

The US dollar has been weakening in the last month following the US Federal Reserve’s pronouncements of lesser rate increases in the next quarters. The tamer US inflation which was still decades high, is also contributing to the softening of the greenback.

When the US dollar was its strongest, the peso depreciated to P59 on Sept. 29, the lowest exchange rate on record. The previous record was P56.45 in 2004.

The Bangko Sentral ng Pilipinas (BSP) in its latest Monetary Policy Report said the exchange rate could remain above the P55-level until next year and possibly in 2024.

The inter-agency Development Budget Coordination Council (DBCC) has an exchange rate assumptions of P51 to 53 versus the greenback for 2022, and P51 to P55 for 2023 and 2024. The DBCC approved the exchange rate assumptions last July 8, when the peso was at P56.

The BSP said the projected exchange rate reflects “the continued depreciation of the peso as well as higher outlook for US interest rates” and that it was “consistent with cumulative policy rate hikes by the Federal Reserve of 425 bps (basis points) in 2022 and 50 bps in 2023.”

Since June this year, the strong US dollar has caused the peso to sharply depreciate. It fell to P53 on June 10, P54 on June 17, P55 on June 29, P56 on July 7, P57 on Sept. 6, P58 on Sept. 21 and P59 on Sept. 29.

The country’s exchange rate policy supports a freely floating exchange rate system where the BSP leaves it to market forces to dictate the exchange rate level. The BSP will only enter the spot market to ensure “order and temper destabilizing swings” in the peso-US dollar rate.

Peso takes a beating against dollar

Philippine peso had its worst day in three-and-a-half years, falling to P53 to the United States dollar. File Photo

 

By Mayvelin U. Caraballo, Manila Times

June 11, 2022

(UPDATE) THE Philippine peso had its worst day in three-and-a-half years, falling to P53 to the United States dollar on Friday.

The local currency bled 5 centavos to $53:$1 from the previous day's close of P52.95. It hasn't been this soft since Dec. 20, 2018, when it closed at 53.10:$1.

The peso's slide was probably due to market participants anticipating the US Federal Reserve's (Fed) 50-basis-point interest rate hike next week, Domini Velasquez, chief economist at China Banking Corp., said.

"Generally, we still see USD-PHP (dollar-peso rate) moving upwards both because of the Fed's aggressive monetary tightening cycle and domestically, the value of import purchases are still bound to increase as oil and food prices continue to remain elevated. Hence, still more demand for dollars," Velasquez said.

ING Bank Manila senior economist Nicholas Antonio Mapa said the peso was simply following the trend among regional currencies.

US inflation becoming everyone's problem.

"Hawkish tilt from the ECB (European Central Bank) and a likely similar stance from the Fed keeping Asian currencies on the backfoot. Markets await US inflation out later tonight for more direction," Mapa said.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the recent increase in US Treasury rates to above 3 percent for most long-term tenors contributed to the dollar's recent rise against key global currencies.

"Market sentiment also weighed as global crude oil prices posted new 3-month highs recently and also near 14-year highs, at above US$120 per barrel recently, that could potentially add to elevated inflation and could also add to the country's oil import bill," Ricafort said.

He also said the peso has recently depreciated slightly against the US dollar due to signs of a probable reduction in large banks' reserve requirement ratio later this year.

But the depreciation has been countered by the possibility of more local policy rate hikes during the next rate-setting sessions in June and August this year, Ricafort said.

Friday's close already hit the upper end of the government's P50-53:$1 peso-dollar exchange rate forecast for the year.

The Development Budget Coordination Committee said various depreciation (for example, US policy normalization, the Russia-Ukraine conflict, and widening trade gaps) and appreciation pressures (higher foreign exchange inflows via tourism, business process outsourcing and overseas Filipino workers remittances, and ample foreign exchange reserves) continue to influence the peso's medium-term outloo

Peso sinks past P52:$1 level for the first time since 2019, stoking inflation fears

The STAR / Miguel de Guzman, File photo

The last time the local currency traded at this level was back in September 2019, when the government’s ambitious infrastructure program pushed up demand for the greenback amid heightened importation of construction materials.

Ramon Royandoyan - Philstar.com

MANILA, Philippines — The Philippine peso dropped past the P52 barrier for the first time since 2019 on Monday as Russia’s invasion of Ukraine continued to prop up the US dollar, triggering inflation concerns amid already high oil prices.

The local unit shed 44 centavos from its previous finish to close at P52.18 against the greenback. Its worst showing for the day was at P52.19 versus the dollar.

Inflation steadies in February despite high oil prices

The last time the local currency traded at this level was back in 2019, when the government’s ambitious infrastructure program pushed up demand for the greenback amid heightened importation of construction materials.

As it is, the peso is trading within the Duterte administration’s P48-P53 average forecast for this year. The currency has fallen by 2.3% since the beginning of 2022.

Emerging market currencies like the peso have been one of the economic casualties of the ongoing war in Ukraine amid investor concerns over the escalating conflict in Europe which has sent global oil prices rallying to multi-year highs.

Worsening the capital flight was Federal Reserve Chair Jerome Powell’s statement last week that the US central bank may begin tightening this month. At home, dollars traded on Monday amounted to $1.6 billion from $793.2 million previously.

For Nicholas Antonio Mapa, senior economist at ING Bank in Manila, the currency slump could create a big problem for Filipino consumers. This, Mapa said, may force the Bangko Sentral ng Pilipinas to lift rates sooner even as it wanted to sustain its ultra-loose monetary policy for much longer to nurture a nascent economic recovery.

"Peso weakness will likely fan even more imported inflation. Inflation expectations also now becoming disanchored as the Bangko Sentral ng Pilipinas retains dovish tone amid a hawking Fed and now skyrocketing energy prices,” Mapa said.

“Case for BSP to hike to corral runaway inflation expectations cannot be more apparent,” he added.

Sonny Africa, executive director for nonprofit IBON Foundation, agreed with Mapa. "Half our energy comes from oil and virtually all our oil is imported so a falling peso greatly increases our oil bill and worsens inflationary pressures. Recovery will be even slower with accelerating inflation," Africa said in a text message. 

"Rising prices will dampen consumption spending already depressed by high joblessness and low incomes, and make it even harder for struggling businesses to stay afloat much less expand. Overseas remittance-receiving families will at least see some gain but this will likely not be enough to offset lockdown-driven depressed incomes across so much of the economy," Africa added.