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Philippines: Peso appreciation to continue, says BSP
MANILA, Philippines — Favorable investor sentiment over the country’s sound macroeconomic fundamentals is expected to provide support to the peso, which appreciated to its strongest level in nearly four years, despite weaker inflows due to the pandemic, according to the Bangko Sentral ng Pilipinas.
BSP Governor Benjamin Dioko said the local currency should continue to reflect prevailing demand and supply conditions in the foreign exchange market amid the global health crisis.
The peso continues to strengthen despite the 4.2 percent decline in personal and cash remittances from January to June. Likewise, inflows from export earnings and tourism receipts continue to suffer due to the implementation of mobility restrictions to slow the spread of the virus.
The peso is one of the strongest currencies in the world, appreciating by 4.35 percent to close at 48.485 to $1 last Friday from 50.64 to $1 as of end-December last year.
“As you know, the peso has appreciated despite the COVID-19 outbreak. This is because the market and investors continue to focus on the Philippines’ strong macroeconomic fundamentals,” Diokno said.
The BSP chief attributed the strength of the peso to the country’s sound macroeconomic fundamentals characterized by a benign inflation environment, strong and resilient banking system, prudent fiscal position, as well as sufficient level of international reserve buffer.
The country’s gross international reserves (GIR) hit an all-time high of $98 billion as of end-July.
“Over the last five years, the peso’s performance has been relatively stable against the baskets of currencies of the country’s trading partners, both advanced and emerging or developing economies,” he said.
In the period leading up to the pandemic, Diokno said the Philippines also enjoyed a favorable ranking among peer emerging economies in terms of debt management and foreign exchange reserves.
“This has similarly contributed to the relative stability of the domestic currency. This is further strengthened by the government’s timely and decisive macroeconomic measures to mitigate the adverse impact of the pandemic,” he said.
Diokno said the affirmation of the country’s credit rating by S&P Global Ratings, Moody’s Investors Service and Fitch Ratings, as well as the upgrade to ‘’A’’ status by Japan Credit Rating Agency supported the performance of the peso.
From a monetary policy perspective, the BSP chief said the stability of the peso has helped temper inflationary pressures arising from the increases in international prices, particularly crude oil and agricultural food commodities.
Source: https://www.philstar.com/business/2020/09/01/2039163/peso-appreciation-continue-says-bsp