Peso returns to 55:$1 after nearly 17 years

The Philippine peso resumed its decline on Wednesday after gaining in two previous consecutive trading days, breaking the 55:$1 level at 55.06 at a time described as a “temporary calm” for the US dollar foreign exchange markets.

Wednesday’s closing rate was the weakest for the peso since Oct. 27, 2005, when the local currency was pegged at 55.08 against the greenback.

ING Bank said dollar markets have entered a period of temporary calm and ranges so far this week have been “quite subdued.”

“It may not feel like it today, but the foreign exchange options market expects volatility to stay high over coming months as central bankers deal with sticky inflation and are being encouraged to act fast,” ING Bank said.

The bank, which is based in The Netherlands, was referring to statements made by the Bank of International Settlements in its latest annual report issued earlier this week.

Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., said the exchange rate has corrected earlier this week and “appears to have stabilized.”

Ricafort said this happened after the net gains in the local stock market since Friday (June 24), and as global crude oil prices lingered at one-month lows while the 10-year US Treasury yield hovered at two-week lows.

Good for bargain hunters

“This would be more advantageous for some foreign investors converting their US dollars and receive more peso proceeds used for any bargain-hunting [or] bottom fishing activities and other purchases in the local financial markets and other local assets,” he added.

Still, Ricafort noted that the peso has, since starting the year at 51:$1, depreciated by more than 7 percent—making it the worst performing currency in Southeast Asia.

Earlier, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the peso remained relatively stable in line with current trends of most regional currencies.

“Filipinos look at the peso and see that it’s losing value,” Diokno said. “But you have to compare it with regional competitors. Everybody’s losing relative to the dollar.”

The BSP chief said the peso has been depreciating mainly because the Philippine currency was reflecting market sentiment that affects emerging economies across the globe due to the Ukraine-Russia conflict.

“This remains manageable, within our projections, and largely in line with the trend of other currencies,” he reiterated.

“The [BSP] remains committed to a market-determined exchange rate and we intervene only to ensure orderly market conditions and prevent excessive short-term volatility in the exchange rate,” he added.