The peso tumbled for a fourth day to hit a new 10-year low of 50.94 against the US dollar Wednesday on widening trade deficit.
The peso lost P0.17 from 50.77 a dollar on Tuesday. It was the local currency’s weakest level in almost 11 years, or since it closed at 50.945 a dollar on Aug. 30, 2006. Total volume turnover reached $523 million Wednesday, down from $653 million Tuesday.
Bangko Sentral Deputy Governor Diwa Guinigundo said the weakness could be traced to the surging imports as the economy expanded, resulting in a widening trade deficit.
“We surmise that while exports continued to recover, the expanding economy pushed imports higher particularly of capital goods and raw materials. This contributed to the recent downtrend of the peso against the US dollar even as the overall macroeconomic fundamentals remain robust,” Guinigundo said in a statement.
“We attribute the underperformance [of the peso] to the wider than expected trade deficit [for May]…,” ING Bank Manila senior economist Joey Cuyegkeng earlier said.
The country’s balance of payments posted a deficit of $569 million in June, a turnaround from a surplus of $418 million a year ago. The June deficit was alsobigger than the $59-million deficit in May.
This brought the balance of payments in the first half to a deficit of $706 million, a reversal of the $634-million surplus in the same period last year.
“[The deficit was] due mainly to higher corporate demand for foreign exchange that affected FX operations of the BSP coupled with debt payments by the national government. These were mitigated by NG deposits with BSP and inflows from BSP’s investment income from abroad,” Guinigundo said in a text message.
“Although trade data are not yet available for June, we surmise that while exports continued to recover, the expanding economy pushed imports higher particularly of capital goods and raw materials. This contributed to the recent downtrend of the peso against the US dollar even as the overall macroeconomic fundamentals remain robust,” Guinigundo said.