THE peso on Wednesday weakened to a new 11-year low against the US dollar, pulled down mainly by the country’s widening trade deficit and speculations on who will be the next Federal Reserve chairman.
The local currency lost P0.23 to close at 51.77 from 51.54 on Tuesday. It was the peso’s weakest level in more than 11 years, or since 51.87 on July 25, 2006. Volume turnover reached $773 million, up from $551.2 million Tuesday.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said there was fundamental demand for US dollar for imports, outward investments and debt servicing.
“Beyond these, it looks like the market is betting on a hawkish candidate for US Fed chairmanship plus the recent positive news about the US economy. All of these have resulted in a strong US dollar,” he said in a statement.
But Guinigundo said markets and investors should not be overly concerned about the peso movements, noting that the currency was “flexible enough” to reflect the necessary adjustments in the macroeconomy to restore equilibrium.
“This is not the first time that we are hitting these lows in the peso dollar rate. With exports continuing to rebound and with support from strong remittances and BPO receipts, we should see some mitigation in both the current account and the exchange rate,” he said.
“We have seen how the peso had appreciated to nearly P40 a dollar to as low as P55 to a dollar but the economy remained strong, stable and resilient. There is much more than an exchange rate gyration,” Guinigundo said.
He said the strength of the greenback was the effect of higher corporate demand for imports and trade financing.
Earlier, Finance Secretary Carlos Dominguez III said the weakening of the peso against the greenback was expected due to the rising importation of capital goods amid the fast-growing economy.
Latest data from the National Economic and Development Authority showed the trade-in-goods deficit in August widened to $2.41 billion from $2.13 billion a year ago as imports outpaced exports.
Total exports increased 9.3 percent to $5.51 billion in August from $5.04 billion a year ago, while imports jumped 10.5 percent to $7.92 billion from $7.17 billion on year.
The Cabinet-level Development Budget Coordination Committee recently kept the peso-dollar exchange rate this year at P48 to P50, although conceding that global economic and political developments had been affecting the trend in emerging market currencies, including the peso.
But DBCC’s forecast for the years 2018 to 2022 was adjusted to 48 to 51 per dollar, due to the resumption of the US Federal Reserve’s monetary policy tightening that could put more pressure on the peso.
The peso sank to an all-time low of 56.45 in August 2004.