The peso remains among the best performing currencies in Asia amid the onslaught of the COVID-19 pandemic, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Thursday.
“The peso’s strength can be attributed to sound macroeconomic fundamentals characterized by a benign inflation environment, a strong and resilient banking system, prudent fiscal position and a sufficient level of international reserve buffer,” Diokno said in an online briefing.
He said the local currency appreciated by 4.2 percent against the US dollar as of Aug. 19 from the end-December 2019 level. It also performed better than other Asian currencies such as the Chinese yuan, Taiwanese dollar and the Japanese yen.
The peso closed at 48.62 against the dollar on Thursday, compared to 50.635 at the end of 2019 trading period.
“The county’s favorable ranking among peer emerging economies in terms of debt management and foreign exchange reserves has likewise supported investor sentiment on the currency,” Diokno said.
The country’s debt-to-gross domestic product ratio of 39.6 percent as of December 2019 was lower than those of neighboring emerging economies, while the country’s gross international reserves reached an all-time high of $98 billion as of end-July.
The GIR is equivalent to 8.9 months’ worth of imports of goods and services and payments of primary income.
Diokno said the government’s timely and decisive macroeconomic responses to mitigate the adverse impact of the pandemic also contributed to the relative strength of the domestic currency.
“The stability of the currency has helped temper inflationary pressures arising from increases in international prices of commodities, particularly crude oil, as well as agricultural food commodities. The prevailing benign inflation environment, in turn, allows continued policy space to support economic activity as needed,” Diokno said.
He said the peso was anticipated to be broadly stable in the coming months in line with the supply and demand conditions in the foreign exchange market and the continued soundness of macroeconomic fundamentals.
It is also expected to benefit from the gradual reopening of the economy amid ample policy support coming from the fiscal and monetary authorities.