PROFIT-TAKING and renewed investor interest in the Philippine economy boosted the local currency on Monday after the peso closed at its strongest level in over two months to jump back to the P49:$1 territory.
The local currency finished Monday’s trade at P49.70:$1, gaining 37 centavos from P50.08:$1 on Friday last week. It opened at P49.88 to $1, before trading between P49.70 and P49.88 against the US currency, lodging its strongest closing since it finished at P49.96:$1 on February 6.
“The peso’s appreciation was unexpected as the economic developments in the US last Friday [were]fairly balanced, with the NFP [non-farm payroll] report falling abruptly and the jobless rate improving to a 10-year low,” said Land Bank of the Philippines market economist Guian Angelo Dumalagan.
New York Fed President William Dudley also provided a positive lead for the dollar by affirming the US central bank’s intent to hike rates this year, despite a likely reduction in the Fed’s balance sheet, Dumalagan noted.
“Given the balanced the developments in the US, I think that the peso’s appreciation might be attributed to profit-taking ahead of the long weekend,” he said.
Dumalagan added that the stronger peso “might also be a reflection of foreign investors’ renewed interest in the Philippines, as evidenced by the surge in local stocks in the past few days.”
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo shares this view, citing reports that the market seems to be encouraged by the good prospects of the government’s tax reform package and tax amnesty plan.
“As you know, we have expressed support of such a plan because from a monetary perspective, over the medium term, that is going to be a positive for price stability,” he said.
“I also believe that the country’s sustained positive macroeconomic outlook on growth and price stability helped convince the market that it needed to consolidate and reconsider its unfavorable view about the peso,” he added.
Guinigundo further said that despite some political noise, the economy is well on its track to demonstrating its good performance despite the risky operating environment.
LandBank’s Dumalagan, however, said the peso’s recent strength might be short-lived considering that the US is still generally on track to hiking rates two more times this year.
“Expectations of more US fiscal stimulus might also lead to a generally weaker peso this year,” he predicted.