The peso remains relatively stable compared with other Asian currencies despite the onslaught of the COVID-19 pandemic, the Department of Finance said over the weekend.
In an economic bulletin, Finance Undersecretary and chief economist Gil Beltran said like other currencies in the region, the peso weakened against the US dollar at the end of the first semester of 2021.
But Beltran said year-to-date, “the peso depreciated by 1.05 percent against the dollar, one of the four strongest among 11 Asian currencies.”
“The peso was the least volatile currency among Asian countries with available data in 2019. The volatility of many currencies increased in 2020 due to the pandemic but the peso remained among the more stable currencies, ranking next to the Thai baht,” Beltran said.
He said the volatility of the peso-dollar exchange rate —as estimated by the coefficient of variation—rose from 0.74 in 2019 to 0.92 in 2020, tracking the trend in Asian currencies.
He said for the month of June, the peso-dollar coefficient of variation rose to 0.94 from the 0.82 registered in May. He said theincrease in volatility might be traced to the Fed’s indication to start ‘talking’ about a taper, that is, reducing its purchase of government bonds and mortgage-backed securities.
“Strong fundamentals support the relative stability of the peso. As of end-May, for instance, the country’s reserves of $107.25 billion could cover more than a year’s worth of imports. Furthermore, the country’s exposure to external debt, measured in percent to GDP, is the lowest among major Southeast Asian economies,” Beltran said.
“Prudent macroeconomic management, containing the spread of the virus and ramping up the vaccination program, and safely reopening the economy will be important in maintaining investor confidence in the country during this time of pandemic,” he said.
Earlier, Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the peso’s weakness in the past few days could also be attributed to the stronger demand for dollars amid the importation season in the third quarter and better employment data.
The Philippine Statistics Authority said the country’s unemployment rate in May 2021 further declined to 7.7 percent from the 8.7 percent a month ago, as 1.45 million jobs were created between April and May following the easing of community quarantine restrictions in the National Capital Region and adjacent provinces and faster implementation of the COVID-19 vaccination program.
Ricafort said these data “could suggest further re-opening of the economy with NCR at GCQ since May 15, 2021, leading to pickup in the economy as well as importation.”
The peso ended 2020 at 48.023 per dollar, significantly stronger than the 50.635 at the last trading day of 2019.
Private economists from the First Metro Investment Corp. and University of Asia & the Pacific last week said the peso might depreciate slightly against the greenback because of the stronger demand for imports as the economy recovers from the health crisis. It is projected to trade within P49-50 to a dollar.