Peso weakness expected to persist until after polls
The peso’s weakness is seen persisting until after the elections as markets remain anxious about a peaceful transition between the present and the incoming administrations.
On the last trading day before markets close ahead of the national elections on May 9, the peso bounced back against the dollar Friday to close at 47.09:$1, nonetheless the weakest level since March 3.
The domestic currency reached an intraday high of 47.07 and a low of 47.35 following Thursday’s close of 47.24 to $1. The total volume traded rose to $725 million from $617 million last Thursday.
In an e-mail to the Inquirer, Bank of the Philippine Islands associate economist Nicholas Antonio T. Mapa said the exchange rate was “seen to trend higher as the peso is pummeled by uncertainty.”
“It’s a double whammy of sorts as the dollar regains its luster against global currencies ahead of the much anticipated US jobs report later on Friday. Adding to that, the peso is also pressured further as we head into the elections, but this is generally the case during election years,” Mapa explained.
“It’s the anxiety over the process being clean and to a lesser extent the winner that drives markets to seek safety in the US dollar,” he added.
Moving forward, Mapa said he expected the market to also be concerned about the turnover during the post-election period and not necessarily be worried about who success President Aquino.
“There are some sectors, notably in business, that appear to be concerned about certain candidates, but markets simply want less uncertainty,” Mapa said.
Historically, “the peso does weaken in the weeks running up to the elections, more so because investors are wary over a clean, credible and peaceful election exercise and not necessarily because they’re concerned about the winner,” he pointed out, noting that the peso was also weaker in 2010 even as then “market-friendly” frontrunner President Aquino was leading the pack.
But risks remained if ever violence would erupt after the elections, Mapa said. “The one thing that can truly hurt sentiment is if the election is too close to call and the results lead to protests and riots in the streets as losing candidates cry foul and allegations of poll fraud surface.”
