Peso falls to 11-year low

MANILA, Philippines — The peso continued to weaken yesterday, shedding 13.5 centavos to close at a fresh 11-year low amid the country’s weakening external payments position due to the widening trade and current account (CA) deficits.

The local currency closed at 52.465 to $1 yesterday from Friday’s 52.33 to $1. This was the weakest level for the peso since closing at 52.745 to $1 in July 19, 2006.

The peso has been weakening for the past three trading days. Yesterday’s trading volume amounted to $705.25 million, higher than the $690.8 million recorded last Friday.

Metropolitan Bank & Trust Co. said the local currency traded within the 52.3 to 52.5 range yesterday amid strong corporate demand.

“Offshore players were seen injecting supply to the market, but this was easily absorbed,” the bank said in its publication Views from the Metro.

The bank said corporate demand has been picking up since Friday. There has been strong demand for US dollars from companies to finance imports of capital and raw materials for the business operations and expansion.

This has translated to the widening trade and current account deficits. Latest data showed the shortfall in the country’s balance of payments (BOP) position swelled to $1.5 billion in the first four months from $78 million in the same period last year.

The BOP is the difference in total values between payments into and out of a country over a period. A deficit means more foreign exchange flows out of the country to pay for the importation of more goods, services and capital than what flows in from exports.

Another trader said the peso is seen weakening further amid hints from the Bangko Sentral ng Pilipinas (BSP) of more rate hikes to curb second-round effects from the implementation of the new tax reform law as well as rising oil prices.