The peso fell to a new 10-year low of 50.70 against the US dollar Monday, on increased appetite for the greenback following better-than-expected US jobs report showing the world’s biggest economy is improving.
The peso lost P0.11 to close at 50.695, down from 50.58 on Friday. It was the local currency’s weakest level since it averaged 50.755 a dollar on Sept. 4, 2006. Total volume turnover was thin at $438.8 million, down from $514.7 million Friday.
“The US dollar traded off the highs after the better–than-expected US jobs report last Friday night Asian time,” Security Bank Corp. said in its daily market report.
Earlier reports said the US job market had a better-than-expected 222,000 new positions created in June, more than the expected 179,000 for the month. The increase in payrolls came after a sluggish 152,000 jobs created in May.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. earlier said the weakening of the peso was “not a cause of concern” and that its movement broadly reflected prevailing market conditions and underlying economic fundamentals, in line with the BSP exchange rate policy.
Espenilla said Bangko Sentral actively managing excessive volatility.
He said a major driver was sentiment for a stronger US dollar as the Fed moved forward with steps to normalize from ultra-easy monetary policy as US economic conditions steadily improved.
University of Asia & the Pacific economist Victor Abola last week said the weakness of the peso could be traced to the expected stronger imports.
Business Monitor International, a unit of Fitch Group, said the peso might close the year at 50.50 a dollar, a downward revision of its previous estimate of 50 per greenback. It said the fragile political outlook in the Philippines and the expected additional rate hikes by the US Federal Reserve would put more pressure on the local currency.
BMI considered the Philippine peso one of the worst-performing currencies in Asia this year, after it broke support at 50 a dollar. BMI said while there was scope for further spot weakness over the coming months given rising real rates in developed markets, the peso was not expected to weaken excessively.
The peso closed at 49.72 to a dollar on the last trading day of 2016. The Cabinet-level Development Budget Coordination Committee kept the peso-dollar exchange rate target this year at 48 to 50 a dollar.