Despite the peso’s recent depreciation to the 50:$1 level, the Department of Finance (DOF) expects the domestic currency to remain relatively stable compared to its Asian peers given ample foreign reserves and low external debt.
In an economic bulletin on Saturday, Finance Undersecretary and chief economist Gil Beltran noted that as of end-June, the peso weakened against the dollar by 1.05 percent, one of the slowest among 11 Asian currencies.
During the period, the Brunei dollar fell by 1.12 percent; the Indian rupee, 0.72 percent; Indonesian rupiah, 2.82 percent; Japanese yen, 6.12 percent; Malaysian ringgit, 2.47 percent; Singapore dollar, 1.12 percent; South Korean won, 3.18 percent, and Thai baht, 0.3 percent.
The Chinese yuan and Vietnamese dong strengthened versus the greenback year-to-date.
Beltran said the peso’s volatility inched up to 0.94 percent in June from 0.82 percent in May due to the US Federal Reserve’s indication it would to “talk about talking” about tapering —that is, reducing its purchase of government bonds and mortgage-backed securities.”
A currency’s volatility referred to the magnitude of fluctuations against the US dollar, such that a low rate meant relative stability.
The peso’s average volatility in 2019 was 0.74 percent before rising to 0.92 percent last year. Beltran said the peso remained among the more stable currencies in Asia, ranking next to the Thai baht, amid the COVID-19 pandemic when many currencies’ volatility rose.
He said strong fundamentals supported the relative stability of the peso.
“As of end-May, the country’s reserves of $107.25 billion could cover more than a year’s worth of imports. Also, the country’s exposure to external debt, measured in percent to GDP [gross domestic product], is the lowest among major Southeast Asian economies,” Beltran said. As of March, external debt to GDP eased to 17 percent from 17.3 percent in end-2020.
“Prudent macroeconomic management, containing the spread of the virus and ramping up the vaccination program, and safely reopening the economy will be important in maintaining investor confidence in the country during this time of pandemic,” Beltran said.