The peso continued to register the biggest gain against the dollar among major currencies in the Asia-Pacific region in July.
The local currency was buoyed by growing remittances, “hot money” inflows and foreign investments in the country’s business process outsourcing sector.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the peso appreciated by 5.1 percent against the greenback from the start of the year to the end of July.
He said the pace of the peso’s rise in the first seven months was the fastest compared with the performance of other regional currencies—including the Indonesian rupiah, Thai baht, Malaysian ringgit and Singaporean dollars.
The peso closed at 41.72 to a dollar on July 31.
Tetangco also said there was a possibility that the peso would continue to appreciate in the months ahead given existing indicators.
The 5.1-percent year-to-date appreciation of the peso as of end-July followed the 4.33-percent gain as of the end of June, when the local currency was also named the region’s biggest gainer against the US dollar.
The remittances from overseas-based Filipinos had remained strong given the rising demand for Filipino workers by employers in various parts of the globe, officials said.
The BSP earlier reported that cash remittances from overseas-based Filipinos amounted to $8.32 billion in the first five months of the year, up by 5.3 percent from $7.9 billion in the same period last year.
The appreciation of the peso was also fueled by the growth of investments by foreign firms in the BPO sector.
Industry members said the Philippines remained an attractive site for foreign investors in the BPO sector because of its English-speaking and more affordable labor force.
“Hot money” inflows, or foreign investments in peso-denominated securities, also contributed to the peso’s strengthening against the dollar. Data from the BSP showed that foreign portfolio investments registered a net inflow of $871 million in July.
Economic officials said the rise in the net inflow of foreign portfolio investments was a result of the investment community’s favorable outlook on the Philippines.
Foreign exchange traders believe the rise of the peso in the first seven months could have been stronger if the BSP was not intervening. The central bank is believed to have been buying dollars from the market to help temper the rise of the peso and prevent too much volatility in the exchange rate.
The BSP said it was not biased for or against a strong peso. Its focus, the BSP said, was on preventing too much volatility in the exchange rate.
A sharp and sudden movement in the currency is bad for the economy, it added.
The peso’s strengthening is beneficial to companies engaged in importation, as this helps reduce the dollar value of imported goods, while the depreciation of the currency is advantageous to export-oriented firms and their employees.—Michelle V. Remo