Peso sustains strength vs US dollar
Local currency is 3rd fastest rising in AsiaBy Michelle V. Remo
Philippine Daily Inquirer
Backed by a favorable sentiment on the Philippine economy, the peso sustained its uptrend, making itself the third fastest-rising Asian currency in the first quarter.
Data from the Bangko Sentral ng Pilipinas showed that the peso inched up further against the US dollar by 0.61 percent in the first three months of the year as it closed at 40.8:$1 on March 27, the last trading day before the Lenten break.
Only the Thai baht and the Indian rupee surpassed the peso’s rise during the period, appreciating by 4.69 percent and 0.97 percent against the dollar, respectively.
The Chinese yuan rose by 0.30 percent, with China now allowing more flexibility in the exchange rate as economists point out the need for the world’s second-biggest economy to shift from a policy of driving exports to boosting domestic demand.
Meantime, other actively traded Asian currencies depreciated against the US dollar in the first quarter.
Indonesian rupiah fell by 0.79 percent; Malaysian ringgit by 1.26 percent; Singaporean dollar by 1.69 percent; Taiwan dollar by 2.87 percent; Korean won by 3.75 percent; and Japanese yen by 8.86 percent.
The peso’s uptrend came amid the bullish outlook of financial markets on the Philippines, which has just received its first-ever investment grade from a major international credit rating agency.
Fitch Ratings on Wednesday announced it has raised the credit rating of the Philippines by a notch to BBB-, which is the minimum investment grade level.
The credit watchdog cited several factors for its decision. These include significant improvement in the Philippine government’s fiscal situation over the past decade, the buildup in the country’s foreign exchange reserves, and sustained growth of the economy despite the drag caused by debt problems in industrialized countries.
After hovering in the P40-to-a-dollar territory for most of the first quarter, the peso actually fell back to the P41 level on Tuesday because of the crisis in Cyprus that has caused jitters in financial markets worldwide. The following day, however, the peso bounced back to the P40 level because of the good news from Fitch.
Market players expect the peso to remain relatively strong in 2013 after its strong performance the previous year. They said the investment rating is expected to further boost appetite for peso-denominated securities.
In 2012, the peso registered the second fastest pace of appreciation against the greenback, next to the Korean won, as remittances grow and the positive outlook on the Philippines pushed up demand for peso-denominated assets. The peso had risen by nearly 7 percent throughout 2012 as it closed at 41.05:$1 on the last trading day of the year.
Demand for peso-denominated stocks and bonds has pushed the Philippine Stock Exchange index to record highs and interest rates on government securities to record lows.
However, the rise of the peso also has its disadvantages. The country’s export sector cites the rise of the local currency for making Philippine goods more expensive for foreign buyers and, therefore, less price competitive.