The peso fell for a third day, drawing closer to 50 per US dollar, as uncertainties surrounding the policies of newly-elected US President Donald Trump and the expected interest rate hike by the Federal Reserve next month jolted global financial markets.
The peso lost P0.22 to close at 49.78 against the greenback Friday from 49.56 Thursday. It was also the local currency’s weakest level in almost eight years, or since settling at 49.83 a dollar on Nov. 24, 2008 during the global financial crisis.
Total volume turnover reached $812.9 million Friday.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said the country’s sound macroeconomic fundamentals continued to shield the peso from further volatility.
“The exchange rate is normally our first line of defense in adjusting to new shocks to the peso and the rest of the economy. Given the uncertainties surrounding the new leadership in the US, Brexit, US Fed interest rate hike and China slowdown, the peso is now our adjustment tool,” Guinigundo said in a text message.
“As long as the volatility remains manageable and speculative plays are held at bay, we should allow the adjustment to continue. After all, we should remember that our fundamentals remain sound with third-quarter real GDP at 7.1 percent”•which would anchor all of these adjustments and rebalancing to manageable proportions,” he said.
He said monetary authorities would remain attentive and closely monitor the situation.
Security Bank Corp. said in a report the US dollar trend was very apparent and confirmed both technically and fundamentally.
Asian central banks intervened in the market to support their currencies. Indonesia’s central bank intervened a week ago after the rupiah dropped as much as 3 percent. Malaysia’s central bank said the same day it would manage volatility and India’s central bank was said to be buying rupees.
“We think Asian central banks will not be worried about seeing their currencies depreciate against the U.S. dollar,” said Enrique Diaz-Alvarez, chief risk officer at foreign-exchange broker Ebury in New York, Asia’s most-accurate forecaster last quarter.
“They may smooth out spikes in volatility, but this is far less expensive in terms of foreign-exchange reserves and they have more than plenty for that. We think that the story now is not so much a flight from Asian currencies but as a pure dollar rally,” Alvarez said.
Malaysia’s ringgit has weakened 4.9 percent since Nov. 8 and South Korea’s won has dropped 4.1 percent. Indonesia’s rupiah lost 2.6 percent, the Philippine peso fell 2.3 percent and India’s rupee declined 2.1 percent.
The Philippines incurred a balance of payments deficit of $183 million in October, a reversal of the $469-million surplus a year ago. The deficit trimmed the BOP surplus in the first 10 months to $1.465 billion, compared to the $2.276-billion surplus registered in the same period last year. With Bloomberg