Peso strengthens, pierces 48 to $1 barrier

MANILA, Philippines — The peso pierced the 48 to $1 barrier yesterday, hitting its strongest level in almost four years due to weak demand for the greenback.

The local currency gained nine centavos to close at 48.92  from Monday’s close of 49.01 to $1. This is the strongest level for the peso since closing at 48.66 to $1 on Nov. 10, 2016.

It opened weaker at an intraday low of 49.08, but closed at an intraday high of 48.92 to $1. Volume jumped by 81.6 percent to $743.4 million from Monday’s $409.3 million.

Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, said factors leading to the sustained appreciation of the peso include the persistent lack of onshore dollar demand amid the backdrop of a deep domestic recession.

Asuncion also cited the settlement of the P516.3 billion in  Retail Treasury Bonds (RTBs) sold by the Bureau of the Treasury (BTr) this week that continues to contain portfolio flows.

ING Bank Manila senior economist Nicholas Mapa said the peso continues to strengthen as the current account moves back into surplus despite a projected 10 to 15 percent drop in overseas Filipino workers’ (OFWs) remittances.

Mapa said the current account moved back to positive territory as imports imploded, due in large part to the substantial drop in economic activity and capital formation in particular.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed the country reverted to a current account surplus of $92 million in the first quarter from a deficit of $1.7 billion in the same period last year.

“With economic momentum slowing considerably while the virus spreads, we may not foresee a quick return to pre-pandemic demand for imports.  Thus, the peso may retain its appreciation bias with the current account remaining in surplus,” Mapa said.