Peso slumps to 5-year low

The peso slumped to a fresh five-year low following Beijing’s decision to devalue China’s tightly controlled currency to boost flagging exports.

Unlike most other regional currencies, the yuan’s value is pegged to the dollar by the Chinese central bank. On Tuesday, the yuan lost about 2 percent of its value against the greenback.

A weaker currency can benefit China’s export sector, which has suffered from weak global demand and rising wages. Chinese products become cheaper the weaker the yuan gets.

Following Tuesday’s developments, the peso neared the 46-to-$1 level late in trading before closing at 45.93 from 45.755 the day before, tracking losses among other Asian currencies.

“As expected, initial market reaction on the announcement of the yuan devaluation was weakness among the regional currencies, including the peso,” Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said in a statement.

Volume more than doubled to $1.11 billion from Monday’s $541.8 million in trades.

After opening strong at 45.70: $1, the peso slumped in the afternoon to hit an intraday low of 45.97. Early in the session, the peso rose to a high of 45.67.

“Should the adjustment in the yuan, however, become effective in supporting Chinese exports in the near term, that could help sustain regional trade and in turn help support global growth,” Tetangco said.

In the meantime, he said the peso would continue to be affected by external developments, but market participants were also expected to put weight on the country’s sound macro fundamentals, Tetangco said.