The peso climbed to a 44-month high of 49.33 against the US dollar on Friday, boosted by net foreign buying in the local stock exchange.
Data from the Bankers Association of the Philippines showed the local currency strengthened to 49.33 per greenback on Friday from 49.365 on Thursday. It was its strongest closing since it settled at 49.17 per US dollar on Nov. 15, 2016. Total volume reached $472.5 million on Friday, slightly down from $481.2 million on Thursday.
“[The] peso enjoyed additional strengthening bias with foreign investors returning to the local stock market as net foreign buying was noted in the PSE [Philippine Stock Exchange] after 15 straight sessions of outflows,” ING Bank Manila senior economist Nicholas Antonio Mapa told the Manila Standard via e-mail.
He said the peso might continue to enjoy the strengthening bias as the greenback remained relatively weak given the global central bank easing.
“BSP [Bangko Sentral ng Pilipinas] will continue to make its presence felt in the spot market, although a breach of the 49 level may happen if import demand continues to fall rapidly and remittances bounce back to expansion,” Mapa said.
Latest data from the Philippine Statistics Authority showed that imports fell 40.6 percent in May to $5.85 billion, the second highest annual drop since decreases were observed beginning May 2019. In the previous month, the decline was higher at 65.3 percent.
Cash remittances also contracted by 16.2 percent in April to $2.046 billion from a year ago, the widest drop since the 33.5-percent contraction in January 2001. The BSP expects remittances to contract by 5 percent this year.
The Department of Finance said the peso remained one of the most stable Asian currencies despite the risks heightened by the onslaught of the COVID-19 pandemic that impacted global financial markets since the early part of the year.
Finance Undersecretary and chief economist Gil Beltran said in an economic bulletin that as of July 8, 2020, the peso ranked first this year among the four currencies in Asia that maintained their value against the US dollar.
Beltran said the peso appreciated by 2.21 percent relative to the dollar, ranking first among Asian currencies including the Hong Kong dollar, Taiwan dollar and Japanese yen which appreciated by 2.07 percent, 1.68 percent, and 0.87 percent, respectively.
He said that despite the rising risks in the global economy, heightened by the spread of the COVID-19, the collapse of global markets, the extreme volatility in currencies and the downgrading of credit ratings of many economies, the Philippine peso remained firm, appreciating from the year-end 2019 level.
The peso-dollar exchange rate also remained stable in 2020, with its coefficient of variation at 0.73 percent ranking third among 12 regional currencies and lower than the 1.86 percent Asian average.