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

Philippines Near Ground Zero in Emerging Market

Bloomberg

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Asia’s emerging markets have faced outflows since Donald Trump won the US presidential election earlier this month. The Philippines is ground zero for the rout as a resurgent US dollar and Manila’s still-expensive stock market have made it even more vulnerable, with the peso plunging to an eight-year low.

The currency of the Southeast Asian nation reached 50 to the dollar for the first time this decade on Thursday and headed for its biggest annual loss since 2013. While equities are poised for their worst month since August 2013, valuations are still the priciest in Asia.

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A Bloomberg gauge of the dollar is heading for the strongest close since at least 2005 amid speculation the president-elect’s policies will push the Federal Reserve to undertake a faster pace of rate increases.

“Emerging markets globally are experiencing fund withdrawals, but what makes the Philippines different, or vulnerable, was its valuation,” said Smith Chua, chief investment officer at Bank of the Philippine Islands, the nation’s second-biggest money manager with the equivalent of $12 billion in assets under management.

“The foreign-exchange movement has also been a significant factor for overseas investors. As the year is heading to a close, some of them want to lock in their gains before the peso weakens further.”

The last time the Philippine peso neared 50 to the dollar in 2008, the global financial system was melting down and the central bank raised interest rates to defend it.

Bangko Sentral ng Pilipinas is probably watching the market as the peso didn’t go beyond the 50 level, according to Jonathan Ravelas, chief market strategist at BDO Unibank Inc., the nation’s biggest bank by market value.

Other currencies in the region have not been spared, with Malaysia’s ringgit approaching its weakest level since 1998 when the Asian financial crisis occurred. The Indian rupee was also trading near a record low reached in August 2013.

A look at the flow of exchange-traded funds show that in the past month the US had the biggest net inflow at US$55 billion, data compiled by Bloomberg show. By contrast, developing nations, led by China and including the Philippines, saw outflows.

The Philippine peso has weakened almost 6 per cent in 2016. Overseas investors offloaded a net $327 million from the stock market in November, set for a fourth month of sell-offs since President Rodrigo Duterte took office at the end of June.

Philippine stocks are trading at 16.29 times 12-month estimated earnings, higher than the 11.9 times for the MSCI Emerging Markets Index of shares. The nation’s dollar bonds, which were up as much as 12 per cent this year in July, have pared those gains to about 4 per cent.

Philippine equities valuation peaked at 19.6 times earnings in July as stocks rallied amid speculation Duterte’s policies would accelerate one of the region’s fastest-growing economies. Since then, concerns over his deadly drug war -- which has killed thousands -- and his anti-U.S. rhetoric have led investors to pull back.

Some foreign-exchange strategists estimated earlier this month the currency would reach the 50 level only by next year as a seasonal increase in money remitted by overseas Filipinos for Christmas spending will curb a decline in the currency.

“A weaker peso just gives more dollar value to potential investors in emerging markets,” said Manila-based Ravelas at BDO said. “In terms of our valuation in the stock market, we’re expensive.”

Philippine Pesos Slides Again...

By Lilian Karunungan 

 

The Philippine peso weakened to a nine-month low on concern the Federal Reserve will scale back its monetary stimulus, reducing the flow of funds to emerging markets. Government bonds fell for a third day.

The Dollar Index advanced for a second day after U.S. data yesterday showed consumer confidence climbed to the highest level in more than five years and home prices increased by the most in seven years. Foreign funds sold $85 million more Philippine equities than they bought in the last three days, exchange data show. The Philippine Stock Exchange Composite Index fell 3.8 percent since reaching a record high on May 15. It was 0.2 percent higher today.

“People are expecting a tapering of quantitative easing in the U.S.,” said Joey Cuyegkeng, an economist in Manila at ING Groep NV. “The relatively richer valuation in the stock market has also prompted some offshore profit-taking from the Philippines.”

The peso declined 0.9 percent to 42.335 per dollar as of 10:05 a.m. in Manila, the lowest level since Aug. 30, according to prices from Tullett Prebon Plc. The currency dropped 2.7 percent this month, taking this year’s loss to 3.1 percent. 

The Dollar Index, which Intercontinental Exchange Inc. uses to track the green back against currencies of six major U.S. trading partners, added 0.17 percent to 84.244. The Fed purchases $85 billion of bonds monthly.

The yield on the government’s 8 percent bonds due July 2031 rose 15 basis points to 4.15 percent, according to prices from Tradition Financial Services.

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