Peso hits fresh one-month high vs dollar

MANILA, Philippines — The peso is on a roll, notching a new best performance against the US dollar in more than a month on Wednesday, a day after it appreciated back to P53-mark that completed its one-week winning streak.

The local currency closed P53.89 to a dollar on Wednesday, seven centavos stronger than its P53.96 close the previous day.

This was the peso's strongest performance against the greenback since it ended trading at P53.88 on September 10. It also marked the eighth straight day the peso appreciated against the dollar.

There were also higher amounts of cash that changed hands, amounting to P872.95 billion as against the previous day's P777.8 billion. 

The peso, one of Asia's worst-performing currency this year, has taken a beating together with regional peers like the Indonesian rupiah after the US Federal Reserve raised policy rates three times this year.

Higher interest rates in the US, the world's safe haven, attract foreign investors who tend to leave emerging markets like the Philippines for better returns. This, in turn, weakens the local currency.

The recent gains of the peso are a welcome reprieve for policymakers scrambling to temper inflation, which hit a near decade-high of 6.7 percent in September, which is fueling public discontent.

A weak peso increases the value of imported goods such as oil, which in turn, are recouped by traders by selling their products to local consumers at more expensive prices.

On Tuesday, economic officials said they now see a weaker peso until the end of the Duterte administration in 2022.

From averaging P50-P53 against the dollar from 2018 to 2022, they now think the peso would end this year between P52.5-53, and at P52-55 for 2019 until 2022.

Going forward, officials are also banking on the typical surge in overseas remittances from Filipinos abroad during the Christmas season to prop up the peso.

For the first eight months of the year however, cash remittances only grew 2.5 percent year-on-year to $19.05 billion, running behind the central bank's 4-percent forecast for the year. 

As it is, a weak peso also benefits remittance earners since it means dollars sent to them by relatives abroad are worth more in pesos.

That said, the central bank has also noted in the past that overseas Filipinos tend to take advantage of a weak peso by sending less cash home, which exchange for the same amount of pesos anyway.