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Friday, March 29, 2024

Peso falls to 7-year low of 48.33 a dollar

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The peso slid to a new seven-year low against the US dollar on Thursday, losing P0.08 to close at 48.33 from 48.25 Wednesday.

It was the currency’s weakest level since it settled at 48.356 a dollar on Sept. 16, 2009, at the height of the global financial crisis. Total volume traded reached $583.5 million Thursday.

“The peso remains on the backfoot with currency pair hitting a high of 48.350 despite mild risk on tone on the OPEC [Organization of Petroleum Exporting Countries] decision to cut back on production,” Nicholas Antonio Mapa of the Bank of the Philippine Islands said in a statement.

“We may see these levels for now with the Bangko Sentral ng Pilipinas seen to remain present in the market until market jitters quiet down,” Mapa said.

Bangko Sentral Deputy Governor Diwa Guinigundo said there were many factors affecting the peso and it was very difficult to attribute its weakness to a single event or a statement of any politician.

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“But there is something that many economists and policy makers will agree on—and this is the role of global shocks, global factors driving the movement in the financial markets especially the stock market and the foreign exchange market,” Guinigundo said.

“As far as fundamentals are concerned, I think there are outstanding fundamentals but then the sentiment is something else,” Guinigundo said.

DBS Bank of Singapore said the macro-economic outlook of the Philippines remained bright.  “Arguably, there has been some room for the central bank to tolerate a softer currency, partly as normalization from the outperformance back then. Indeed, comments from government and Central Bank officials suggest that the policymakers are not too concerned about the peso’s recent moves,” the bank said.

DBS said the current account surplus had narrowed due to a slide in the exports of electronic products, and this might have intensified the Central Bank’s tolerance of a weak peso.

“Looking far ahead, how the government rolls out its economic policies will certainly have a bearing on foreign interest in the economy. At least for now, the macro picture still looks positive in our view,” DBS said.

The International Monetary Fund raised its growth forecast for the Philippines this year to 6.4 percent from an earlier estimate of 6 percent on sustained robust domestic demand and expected recovery in exports.

The multi-lateral lender also increased the growth projection in 2017 to 6.7 percent from 6.2 percent. 

“The outlook for the Philippine economy remains favorable despite external headwinds. Real GDP growth is expected at 6.4 percent in 2016 and 6.7 percent in 2017 on continued robust domestic demand and a modest recovery in exports,” IMF said.

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