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Peso weakens to fresh over 10-year low of 50.27:$1

By: - Reporter / @bendeveraINQ
/ 05:38 PM February 27, 2017

“Uncertainty” in local politics coupled with global markets’ anticipation of US President Donald J. Trump’s first speech before the US Congress pulled the peso to a fresh over 10-year low of 50.27:$1 on Monday.

Monday’s close remained the weakest since Sept. 26, 2006’s 50.32:$1.

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At the Philippine Dealing System, the peso reached an intraday low of 50.295:$1 and a high of 50.24:$1. The local currency opened at 50.24:$1, weaker than last Friday’s close of 50.215:$1.

The total volume traded dropped to $366.6 million from $415.3 million on Friday.

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In a note to clients, the research arm of Metropolitan Bank and Trust Co. (Metrobank) said it expects the peso-dollar pair to trade within the range of 50-51:$1 this week.

Last week, Metrobank Research said the peso “will remain under pressure throughout this year amid still volatile financial markets” and is seen ending the year at the 51.3:$1 level.

ING Bank Manila senior economist Joey Cuyegkeng said the weaker peso was partly brought about by “external factors, including President Trump’s speech tomorrow [as well as] speeches of US Federal Reserve policymakers including Fed Chair Janet Yellen and Fed Vice Chair Stanley Fischer this Friday.”

Trump will deliver a speech before a joint session of the US Congress on Tuesday, during which he is expected to spell out his administration’s policy direction in the next four years.

But Cuyegkeng also pointed out that “the peso’s underperformance not only today but since start of the year is a result of local factors.”

“The premium of the peso to the index of Asian currencies (except the Japanese yen) has actually widened to as high as 5 percentage points. We attribute this to local political uncertainties especially in the last couple of weeks,” Cuyegkeng said.

“This set of political developments leading to intensified political noise resulted to cautious views tending to favor the US dollar rather than the Philippine peso,” he explained.

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Also, “stresses on external payments, including a widening trade deficit and lower current account surpluses (although some say a deficit in the current account is looking more likely), contribute to the peso’s underperformance,” he added.

Last Feb. 17, the peso breached the 50:$1 level for the first time since Nov. 16, 2006’s close of 50.12:$1.

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. last week said their surveillance showed that there was “market demand to service legitimate dollar requirements, and that’s moving the market.”

“There is also market positioning as some participants have a view on the US dollar,” Tetangco had said in a text message to reporters.

“These are normally part of a healthy vibrant market. But this is not to say that we will stand back when we see that the movements are disruptive or excessive,” according to Tetangco.

In December, economic managers raised the government’s foreign exchange rate assumption for 2017 to a “comfortable” 48-50:$1 from 45-48:$1 previously.

In 2016, the peso’s full-year depreciation was at par with most of its regional peers as well as less volatile than most currencies, BSP data showed.

The end-2016 peso-dollar closing rate of 49.72:$1 was weaker than end-2015’s 47.06:$1, hence depreciating by 5.35 percent year-on-year, tracking regional currencies such as the Chinese yuan, Malaysian ringgit, Indian rupee, Korean won and Singaporean dollar.

The peso’s volatility or the magnitude of fluctuation against the US dollar rose to 2.35 percent at end-2016, still relatively lower among regional currencies save for the Chinese yuan’s 2.01 percent, the Indonesian rupiah’s 1.85 percent, as well as the Thai baht’s 1.25 percent. RAM

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