The peso plunged to a new 13-year low against the US dollar Tuesday, amid the country’s widening trade deficit and exacerbated by the current global trade war and other external developments.
The peso lost six centavos to close at 53.94 a dollar, down from 53.88 Monday. It was the local currency’s weakest finish in almost 13 years, or since it settled at 53.985 on Dec. 7, 2005.
Finance Undersecretary Gil Beltran said contributing to the weakness of the peso was the Federal Reserve monetary normalization that proped up the dollar against other currencies.
“The Philippine peso has been moving in tandem with Asian currencies amid severe exchange rate volatility spawned by the global trade war, the Turkey-Argentina crisis and the Fed monetary normalization,” Beltran said in an economic bulletin.
He said year-to-date, the peso depreciated 7.39 percent, ranking third among 12 currencies of the fastest-growing Asian countries. The most depreciated currencies were Indian rupee which dropped 11.7 percent and Indonesian rupiah which declined 9 percent.
Other Asian currencies which depreciated this year were the Chinese yuan (down 4.97 percent), Korean won (down 4.46 percent) and Taiwan dollar (3.46 percent).
Beltran said that since July 31, emerging markets were the target of adverse hot money movements as contagion spread from problems in Turkey and Argentina. Beltran said the Philippine peso depreciated by 0.82 percent since then, ranking fifth among eight Asian countries whose currencies depreciated.
He said the coefficient of variation showed that the volatility level of the Philippine peso (at 1.91 percent) year-to-date reflected the average for all 12 Asian countries. Volatility ranged from 0.14 percent for Hong kong to 3.13 percent of China.
Beltran remained optimistic despite these developments, saying “maintaining good macroeconomic policies, thru manageable fiscal and BOP [balance of payments] balances, and adopting economic reforms thru tax reforms are still the best way to sustain growth and investment and, at the same time, steel the economy from external economic shocks.”
