Peso resilient amid US rate hike prospects

VOLATILE global financial market conditions will affect the Philippine peso the least, owing to the country’s strong macroeconomic fundamentals and steady streams of dollar revenue.

Capital Economics, a think tank based in London, said Brazil’s real, Turkey’s lira and Colombia’s peso face the sharpest declines amid market swings. Meanwhile, the Indian rupee, Czech koruna and the Philippine peso are seen as the most resilient currencies among emerging market units.

This comes ahead of the prospect of a US Federal Reserve’s meeting later this week. The US Federal Open Market Committee (FOMC) meets later this week to decide on what could be the first rate hike in nearly a decade.

Analysts are mixed as to whether the rate hike would come this week or later this December.

“Net capital outflows from emerging markets reached almost $250 billion in the three months to August—only a touch less than during the depths of the global financial crisis,” Capital Economics said in a report.

Overall, the research firm said emerging market currencies would fare better than in past bouts of volatility. “The current situation is not as bad as it was in 2008 and 2009,” Capital Economics said.

“And it seems that much of the recent outflow has been due to Chinese individuals accumulating foreign currency deposits, and not necessarily a reason to panic,” it said.

China’s recent stock market crash, coupled with Beijing’s decision to devalue the yuan, put pressure on Asian currencies late last August. The peso dropped to its lowest point in five years and was down 4.5 percent from its level at the start of 2015.

Despite the drop, the peso still performed relatively better than its counterparts in neighboring countries. During the same week, the Thai baht was down 8.01 percent, Singapore’s dollar by 6.23 percent, and Malaysia’s ringgit by 17.57 percent.

Local officials said the peso’s firmness was a result of, among others, steady remittance flows from overseas Filipino workers and income from dollar-earning industries such as outsourcing and tourism.