Peso soars to near 4-year high anew

MANILA, Philippines — There is no stopping the peso from gaining more strength despite a pandemic-induced recession.

The local currency on Wednesday appreciated by one centavo from previous day to close at P48.39 to a dollar. While the peso barely strengthened on a daily basis, the movement was enough for the local currency to notch its best performance since finishing P48.34 against the greenback on Nov. 3, 2016.

That said, the peso's best showing for the day was still the intra-day high of P48.35, indicating that sans central bank intervention, the currency is not yet done appreciating, propelled by the country's hefty dollar reserves and a counterpart weakening of US dollar.

"New record high (gross international reserves) may fundamentally provide buffer to the peso," Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said in a text message.

As it is, the peso is now trading nearly P2 above the revised P50-P52 average forecast of the Bangko Sentral ng Pilipinas (BSP) for 2020. The projection was narrowed from P50-P54 seen last May.

Dollars traded went down to $631.95 million on Wednesday from $409.3 million the previous day.

There are pros and cons of strong currency. While a strong peso makes imports cheaper, helping cool down inflation, a firmer currency also cuts through remittance earnings of families dependent on income from abroad, as well as exports.

The peso's recent strength appears also to come with the wrong reasons. Following strict lockdowns from March to June, business has struggled to recover even with the economy mostly reopened. This, in turn, has led to weak imports, the settlement of which require dollars, and therefore dismal demand and weaker value for the greenback. 

"Appreciating trend of the peso could still continue with the new record-high GIR (gross international reserves), faster recovery in remittances, narrower trade deficits and still weak US dollar," he added.