Peso sinks to 10-year low of 50 to $1
THE peso fell to more than 10-year low against the greenback on Friday, driven by the uncertainty in the external market, especially the looming interest rate hike by the US Federal Reserve next month.
The peso lost P0.03 to close at 50 flat to a dollar from 49.97 a day ago. It was its weakest level since 50.12 to a greenback on Nov. 16, 2006. Total volume turnover reached $480 million, higher than $376 million Thursday.
The peso opened Friday’s trading three centavos stronger at 49.94 before touching the 50-a-dollar level.
Bangko Sentral Deputy Governor Diwa Guinigundo said in a text message despite the market uncertainty brought about a March US Fed interest rate hike, there was higher demand from corporates Friday.
“This drove the peso to touch 50 to a dollar level. We continue to see negative market sentiment dominating the strong Philippine market fundamentals. We should see market reacting to news that OFW remittances remain resilient and growth prospects remain very positive at the back of strong consumption investment and public expenditures,” Guinigundo said.
He said the peso in real terms remained competitive and that the Bangko Sentral was monitoring pressure from a weak exchange rate, although the exchange rate pass-through to domestic inflation dropped in recent years.
Guinigundo added there was no substitute to constant monitoring and surveillance for any possible risks in the horizon.
ING Bank senior economist Joey Cuyegkeng said the demand for US dollar throughout the week had pressured the peso “leaving some traders to cover shorts before the weekend.”
“Philippine specific factors such as recent political developments may have contributed but it is not likely to have been quite significant,” he said.
Cuyegkeng said the peso could remain under pressure although seasonal inflows in March could provide some strength. He said retaining the 50 resistance early next week would be important.
“We are reviewing our forecast for end Q1 and for the rest of the year. We had expected the peso to trade around 49.70 and within the range of 49.50 to 50.00 in the first quarter... ,” Cuyegkeng said.
The peso posted its strongest level this year at 49.46 to a greenback on Jan. 5, as uncertainties caused by the recent unexpected victory of US President-elect Donald Trump and the US Fed’s next moves eased.
The peso closed 2016 at 49.72. But economists from First Metro Investment Corp. and University of Asia & the Pacific said in a recent briefing the peso would remain under pressure as the US economy continued to gain traction, leading to the strengthening of the US dollar.
“The Philippine peso is estimated to trade at 51 against the dollar [this year],” the economists said.
The peso’s weakest level in 2016 was recorded on Dec. 20 when, after breaching the 50-a-dollar mark, it settled at 49.999 to a greenback driven by the uncertainty on the next move of the US Federal Reserve, after raising interest rates and higher demand for dollars from the corporates and the government for debt servicing. It was its weakest close in over a decade since the 50.12 to a greenback on Nov. 16, 2006.