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Philippines: Peso strongest in four years
The Philippine peso advanced to its strongest level in more than four years after exports revenues grew at their fastest pace in a decade. The peso rose for the sixth consecutive week, edging slightly by 4.5 bps this week to 47.81 per US dollar. The currency is among the steadiest performers in Asia this year, up by 0.46 percent year-to-date.
Trade deficit narrows as exports recover
Philippine exports surged 31.6 percent to a record high of $6.68 billion in March 2021, helped by a low comparison base a year ago and a rebound in foreign demand as the global economy recuperates from the COVID-19 pandemic. Exports of mineral products led all commodity groups with a 195.8 percent growth. Meanwhile, electronic products, the country’s leading export grew by 25 percent. The country’s balance of trade improved as the deficit narrowed by 11.5 percent to $2.4 billion.
GIR on pace to hit a new record year
The Bangko Sentral ng Pilipinas (BSP) reported last week that the country’s gross international reserves (GIR) reached $107.25 billion as of end-April. BSP Governor Benjamin Diokno earlier forecasted another record year, projecting that the GIR could reach $120 billion by year-end. Healthy GIR levels act as external buffers or cushions that stabilize the peso in times of foreign exchange volatility and speculative attacks. It is currently equivalent to 12.3 months’ worth of imports of goods and services and covers about 7.5 times the county’s short-term external debt.
Chinese yuan leads Asian currencies
In Asia, the Chinese yuan is leading Asian currencies higher against the US dollar. The yuan climbed to its strongest level in three years on the back of the country’s solid economic recovery post-COVID-19, healthy capital inflows, and large trade surplus. Chinese GDP expanded 18.3 percent in the first quarter of 2021 amid surging exports and increased consumer spending.
The Chinese yuan has appreciated nearly 10 percent against the US dollar the past year and 1.4 percent year-to-date. The intermediate support for USD/CNY is at 6.42, while significant support lies at the 6.20 to 6.24 range.
Philippine peso breaks below 48.0
The Philippine peso has steadily strengthened the past two years because of the resilient stream of OFW remittances and BPO revenues and its hefty dollar reserve levels. As shown in the chart below, USD/PHP remains on a downward trending channel which shows peso appreciation. Despite a brief surge to the 49 levels in February and April, USD/PHP is back below the 48.0 support level. Based on the peso trend and the Chinese yuan’s strength, it is highly likely for the peso to appreciate further. Technical analysis indicates that 46.00 to 46.50 is the next major support range for USD/PHP.
