Peso continues to depreciate

MANILA, Philippines - The peso continued to weaken against the dollar yesterday, shedding another 13.5 centavos amid the fresh terrorist attack in Barcelona as well as the debate over the pace of interest rate hikes by the US Federal Reserve.

The peso closed at 51.49 from Thursday’s 51.355 to $1. This was the weakest level since closing at 51.60 to $1 in Aug. 24, 2006.

The peso opened weaker at 51.45, reaching an intraday high of 51.39 before losing steam to hit an intraday low of 51.63 to $1.

Volume was heavy, breaching the $1 billion level from $688 million last Thursday as traders believed the Bangko Sentral ng Pilipinas (BSP) intervened in the foreign exchange market to smoothen the volatility of the peso.

The peso traded weaker despite the release of the stronger-than-expected gross domestic product (GDP) growth of 6.5 percent for the second quarter from 6.4 percent in the first quarter.

BSP Governor Nestor Espenilla Jr. said the peso is market determined because the objective of the BSP is to focus on keeping inflation low and stable.

“And by keeping inflation low and stable, together with what the rest of the government is doing of keeping fiscal balance, the exchange rate will take care of itself, it will not free fall,” he said.

Economic managers retained the GDP growth target of 6.5 to 7.5 percent for this year from 6.9 percent last year while the BSP sees inflation within the midpoint of the two to four percent target.

“It will take care of itself because the fundamentals are strong,” Espenilla said.

Espenilla reiterated authorities are not alarmed over the weakening of the peso against the greenback.

“I already said the peso is market determined. It will move up, it will move down. These days it is mostly up, there will come a time it goes mostly down,” he said.

Joey Cuyegkeng, senior economist at ING Bank Manila, said the weakness and underperformance of peso is due to a combination of import demand.

“We are in the midst of the import season, market’s view of economic team’s tolerance for a weaker peso, perceived dovish monetary authority and anticipated import demand due to fear of further peso weakness,” he said.

BDO Unibank chairperson Teresita Sy-Coson said there is no reason to fear the continued weakening of the peso against the dollar as the country’s macroeconomic fundamentals remain sound.

“I’m not worried about it. I guess it’s the up and down. I think the BSP (Bangko Sentral ng Pilipinas) knows what’s going on and how to handle it so I guess it’s a part of the up and down,” Sy-Coson said yesterday amid the continuing depreciation of the peso.

The Philippine peso has been on a recent slide, falling to its weakest level last Tuesday since closing at 51.38 to $1 on Aug. 25, 2006.

“On the economy, I don’t think there’s much to be concerned about. It’s just steady, it’s working, and the economy is maintaining its growth. So barring anything that is unforeseen within the environment we have, I guess we’re okay,” Sy-Coson said.

The Philippine Statistics Authority on Thursday reported that the country’s gross domestic product expanded 6.5 percent in the second quarter of 2017, slightly higher than the 6.4 percent growth in the first quarter, but slower than the 7.1-percent growth in the same period last year.

The economy’s recent expansion placed the country as still among one of the best performing economies in Asia.

Sy-Coson said the government’s aggressive infrastructure spending program also augurs well for the economy.

“They said they would be spending so that is good news,” she said.

As far as the tax reform agenda of the government is concerned, the SM Investments Corp. vice chairperson also expressed no apprehension. – With Richmond Mercurio