Peso drops to new low of 50.70:$1
THE peso fell to a fresh low against the greenback Monday, its weakest level since more than 10 years ago.
The peso lost five centavos to close at 50.70 from 50.65 on Friday. It was its weakest level since the 50.755 average on Sept. 4, 2006. Total volume traded reached $256 million, down from $379 million Friday.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. earlier said he was not alarmed by the latest movement of the peso against the US dollar, saying its weakness is “not unusual.”
“It’s actually just reflecting market conditions and underlying fundamentals. We’ve seen nothing particularly unusual about this, it’s the nature of the exchange rate to fluctuate,” he said at the sidelines of an event at Bangko Sentral.
He said the Bangko Sentral would let the exchange rate reflect underlying market conditions.
“What we look at isn’t much the exchange rate but the underlying conditions. Today, the underlying conditions are quite healthy, as a result prices reflect those condition... Our focus is keeping inflation low and banking system strong. These are still existing today,” Espenilla said.
He said volatility continued to exist because of policy uncertainties and political tensions and it was “very difficult to say what’s affecting it on a daily basis.”
University of Asia & the Pacific economist Victor Abola last week said the weakness of the peso could also be traced to the expected stronger imports in the third quarter which is further putting pressure on the local currency.
Earlier, Business Monitor International, a unit of Fitch Group, said the peso might close the year at 50.50 to a greenback, a downward revision of its previous estimate of 50.00. 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.
He said also weighing down on the peso was the Trump administration’s threat to go ahead with more protectionist policies, which could negatively affect the Philippine economy and its external position.
BMI considered the Philippine peso one of the worst-performing currencies in Asia year-to-date, having broken support at around 50 against the dollar in mid-June.
But it 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 just recently kept the peso-dollar exchange rate this year at 48 to 50, although admitting that global economic and political developments have been affecting the trend in emerging market currencies, including the peso.