The Philippine peso remains broadly stable amid the COVID-19 pandemic as it has so far appreciated against the US dollar by 5.4 percent as of early December this year relative to its end-2019 level, according to the Bangko Sentral ng Pilipinas (BSP).
The local currency has also performed better compared to other Southeast Asian currencies and appreciated year-to-date against the US dollar along with the Chinese yuan, Taiwanese dollar, South Korean won and Japanese yen.
Analysts are expecting the peso to remain strong in the near term and remain one of Asia’s top-performing currencies.
“The peso’s strength can be attributed to sound macroeconomic fundamentals characterized by a benign inflation environment, a strong and resilient banking system, prudent fiscal position and a sufficient level of international reserve buffer,” BSP Gov. Benjamin Diokno said in a statement.
“The peso should continue to reflect emerging demand and supply conditions in the foreign exchange market as well as the continued soundness in the country’s macroeconomic fundamentals over the near term,” he added.
Meanwhile, the impact of expected weaker inflows—particularly from the decline in exports and tourism receipts—should be offset by favorable investor sentiment over the strong position of the economy, including in terms of sound debt management and adequate foreign exchange cover, he explained.
The peso and other financial markets should also benefit from the gradual reopening of the economy amid the decline in COVID-19 cases and ample policy support coming from both monetary and fiscal authorities.
Moving forward, policymakers said risks could emanate from uncertainty arising from potential resurgence of COVID-19 cases and its impact on the domestic and global economy. INQ