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Philippines: Peso pierces to 55 to $1 level
MANILA, Philippines — The peso pierced the 55 to $1 level yesterday, closing at its weakest level in almost 17 years as investors believe the US Federal Reserve could maneuver the US economy to a soft landing and avoid recession.
The local currency shed 29 centavos to close at 55.06 from Tuesday’s 54.77 to $1. This was the weakest level for the peso since closing at 55.08 to $1 on Oct. 27, 2005.
The peso opened weaker at 54.90 and hit an intraday high of 54.88 before losing steam to hit an intraday low of 55.10. Trading volume fell by 22.7 percent to $1.28 billion from Tuesday’s $1.65 billion.
Jonathan Ravelas, chief market strategist at BDO Unibank Inc., said that a sustained break above the 55 levels could signal that the test for the 55.75 to $1 level is underway.
“Until a more aggressive monetary policy is set in place, the peso-dollar rate will remain vulnerable to further weakness toward the 55.75 levels,” Ravelas said.
In an interview with Bloomberg Television, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said that the peso has depreciated together with other currencies.
“In fact, we have depreciated much less than the other currencies. You know, the weaker peso or what we call the depreciated peso, which would mean of course, a higher oil bill because we are an oil importing country, but it also helps our exporters make exports more competitive, helps our overseas Filipino workers (OFWs),” he said.
Diokno said a weaker peso means higher value of the dollar earnings of OFWs and exporters.
“On the other hand, it imposes penalties on consumers who prefer imported goods like what I call the Ferragamo crowd, so it makes it more expensive for them. And also for the Filipino travelers abroad. So there are winners and losers in any currency behavior,” the incoming chief of the Department of Finance (DOF) said.
The local currency continues to mirror market sentiment affecting emerging market economies across the globe due to the Russia-Ukraine conflict.
However, the central bank is convinced that the weakening of the peso against the dollar remains manageable and within the government’s projections as the depreciation is largely in line with the trend of other currencies.
“But as a matter of policy, we let the peso determine its own level. That is our first best defense, meaning if there is strong demand for the peso then we expect the currency to depreciate. If there’s a strong supply of the peso which happens maybe in the fourth quarter, there is a move for appreciation,” Diokno said.
Diokno reiterated that the central bank only engages in some transactions to smoothen the volatility and make sure it does not threaten inflation-targeting objective.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the latest peso exchange rate movement was partly due to the healthy downward correction in the Philippine Stock Exchange index after rising for three straight trading days.
Ricafort said the latest currency movements also came after the dollar corrected higher versus major global currencies after continued hawkish signals from some officials of the US Federal Reserve who also signaled that a soft landing remains possible, softer US consumer confidence data, as well as the upward correction in global oil prices.
Source: https://www.philstar.com/business/2022/06/30/2191840/peso-pierces-55-1-level