Peso rebounds, ends 8 straight days of decline

MANILA, Philippines — The peso rebounded yesterday, gaining 20.50 centavos to close at 54.78 from Friday’s 54.985 to $1 and ending eight straight days of freefall, according to the Bankers Association of the Philippines (BAP).

The local currency opened stronger at 54.93 before losing steam to hit an intraday low of 55.15 and rallying to close at its intraday high of 54.78. Volume turnover declined by 15.8 percent to $1.18 billion from Friday’s $1.40 billion.

Domini Velasquez, chief economist at China Bank, said the recent movements of the peso are aligned with market fundamentals such as the Philippines’ larger current account deficit driven by increasing import prices and the narrowing interest rate differentials between the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) that continue to drive market sentiment.

“Recent statements from incoming BSP governor Felipe Medalla seem to imply that they will let the market dictate the value of the currency and will only intervene to smoothen fluctuations and reduce risks of speculative behavior,” Velasquez said.

Despite the healthy correction, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the peso remains the worst performing currency in Southeast Asia.

“Since the start of 2022, the peso’s depreciation of 7.4 percent is now the worst in the ASEAN versus 6.5 percent for the Thai baht, 5.7 percent for the Malaysian ringgit, 5.2 percent for the Chinese yuan and 3.8 percent for the Indonesian rupiah,” Ricafort said.

Ricafort said the strengthening of the peso yesterday after depreciating for eight straight days is considered a healthy correction, as global oil prices recently lingered within one-month lows and the 10-year US Treasury yield lingered within two-week lows.

According to the economist, the peso is also stronger following the recent relief rally in the local and global stock markets after the US University of Michigan gauge of long-term consumer expectations was revised to 3.1 percent from a preliminary 3.3 percent, but still the highest in more than 11 years or since March 2011.

The chief economist of the Yuchengco-led bank said the 2.3 percent weakness of the peso against the dollar has been overdone last week, as other Asian currencies were mostly slightly weaker versus the greenback by less than 0.5 percent.

Likewise, the intraday high of 55.15 was the highest in more than 16.5 years or since Oct. 25, 2005 when it closed at 55.26 to the dollar.

For its part, Fitch Solutions Country Risk & Industry Research said the tightening of global monetary conditions has exerted significant downside pressure on peso and this would also likely prompt the BSP to hike interest rates to prevent the currency from weakening too much.