The peso jumped back into P50-per-dollar territory on Thursday, a development attributed to better-than-expected economic growth.
The currency finished the day at P50.90:$1, gaining 14 centavos from Wednesday in its strongest close since September 29’s P50.81:$1.
“Strength was in line with overall strength of other Asian currencies but [the]Philippine peso likely outperformed in past two days on the back of stronger second and third GDP (gross domestic product) growth and despite the year-on-year drop of remittances in September,” ING Bank Manila senior economist Joey Cuyegkeng said.
The government on Thursday reported third quarter Philippine GDP growth of 6.9 percent, beating estimates of a 6.6-percent expansion at best. A day earlier, it also revised the second quarter growth result to 6.7 percent from 6.5 percent.
Cuyegkeng said a weaker US dollar also helped as US bond yields dropped on flights to safety as stocks slid due to uncertainty over President Donald Trump’s tax reform plans.
“Philippine peso strength could be seen as an opportunity for US dollar users and hedgers,” he said.
Emilio Neri Jr., Bank of the Philippine Islands vice president and lead economist said, the peso’s gain was due to the US dollar’s weakening overnight as markets appeared unconvinced that US tax reforms would be legislated before the end of the year.
“We don’t expect these low levels to persist as fundamentals (overseas Filipinos slower remittances, Federal Open Market Committee policy normalization, persistent trade deficit, slowing foreign direct investments in business process outsourcing, etc.) continue to point to a Philippine peso weakening against the US dollar in the coming months,” Neri warned.
“We are also in the camp that believes a tax package in the US will be passed before the end of 2017,” he added.
Latest data showed that personal remittances had dropped to $2.44 billion in September from $2.62 billion a year ago, down 7 percent and the smallest monthly inflow since the $2.31 billion posted in April this year.
The country’s total balance of trade in goods amounted to $1.91 billion in September, lower than the $2.02 billion recorded in September 2016.