25.7 C
Friday, March 1, 2024

Peso plummets to 11-year low of 52.34 a dollar

- Advertisement -

The peso on Monday sank to a new 11-year low of 52.34 against the US dollar, amid expectations of a wider trade deficit this year coupled with the Bangko Sentral ng Pilipinas’ dovish monetary policy stance.

The peso lost P0.34 to close at 52.34 a dollar Monday from 52 per greenback on Thursday. It was the local currency’s weakest level in more than 11 years since it settled at 52.745 a dollar on July 19, 2006.

Total volume turnover reached $1.025 billion Monday, higher than $578 million worth of transactions in the previous currency trading.

ING Bank Manila senior economist Joey Cuyegkeng said in a report among the reasons for the peso’s weakness was the “wider trade deficit this year increasing by 16 percent to $35 billion” despite record-high remittances in 2017.

He also cited the market’s “perception of the  economic team’s greater tolerance of a weaker peso.”

- Advertisement -

Cuyegkeng said these factors combined kept the peso on the defensive. “Accommodative monetary and fiscal policies would boost growth and likely worsen the trade deficit in 2018. These are ingredients for a weak PHP [Philippine peso]. Significant capital inflows would be need to offset such weak PHP fundamentals,” Cuyegkeng said.

Bangko Sentral early this month kept the benchmark interest rates steady on expectations of manageable inflation environment going forward. It also cut the reserve requirement of banks to 19 percent from 20 percent to free up ample liquidity into the system.

“Capital inflows are needed in a large dose to provide some relief to PHP. BSP is likely to intervene to smoothen out volatility. But in the absence of a hawkish BSP and an FX policy the shows more tolerance for a weaker PHP significant capital inflows are needed,” he said.

Emilio Neri Jr., lead economist of the Bank of the Philippine Islands, said the US dollar “remained well-bid with corporates securing the greenback.”

“I also think that there are lingering concerns on Middle East remittances falling after the Kuwait decision and trade gap widening further in 2018,” Neri said.

The Philippine Statistics Authority reported last week that the country’s balance of trade in goods deficit in December 2017 widened by 63 percent to a record $4.02 billion from $2.47 billion a year ago on surging imports and lower exports.

Balance of trade in goods deficit also widened to $29.786 billion in 2017 from $26.702-billion deficit in 2016.

Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. had downplayed the weakness of the peso, saying the “economy is actually in very good shape.”

“Just too much fretting about isolated issues. We should not lose the big picture,” Espenilla said in an earlier statement.

The peso closed 2017 at 49.93 a dollar, slightly weaker than 49.72 at the end of 2016. It opened 2018 stronger at 49.81 on Jan. 3.

The peso hit an all-time low of 56.45 a dollar in August 2004.

- Advertisement -


Popular Articles