The peso weakened to a five-week low of P45:$1 on the first trading day of 2015 because of pent-up demand for dollars after the long Christmas holidays. The peso last hit this low in November 20, 2014.
The dollar continued to strengthen against “risk currencies,” while remittances from overseas Filipinos failed to offset funds coming out of the Philippines.
“The dollar was on the offensive early in the year, strengthening against most risk currencies as players unloaded the euro in favor of the dollar,” said Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands.
The local currency opened at P44.84 to $1 at the Philippine Dealing System (PDS) on Monday before trading between P44.82 and P45.05.
The unit depreciated by 28 centavos from the P44.72 close on December 29. Total volume transacted on the PDS rose to $978.600 million from $403.500 million in the last trading day of 2014.
Mapa said traders bought up the dollar with European Central Bank President Mario Draghi indicating preparations for the monetary authorities for possible stimulus measures, as soon as early 2015 to counter weakness in the eurozone.
The economist also pointed out that investors also took note of “Grexit” or the possible exit of Greece in the eurozone.
“Fears of a possible Grexit resurfaced with administration presidential candidate failing to garner a vote of confidence, resulting in a snap election later in the month. Anti-bailout party, Syriza, looks to make a strong run at the Presidency, threatening the fragile recovery of the Greek economy,” he explained.
Speculations on the US interest rate hike this year are also generating interest in the dollar, Mapa added.
The BPI economist also said that remittances from overseas Filipino workers, often seen as a slow and steady influx, was unable to offset the surge in outflow during the session, “limiting the ability of the influx of overseas Filipino remittances to stem the tide.”
As of end-October, cumulative remittances rose 6.7 percent to $22.02 billion from $20.64 billion in the same period in 2013.
Meanwhile, cash remittances or funds coursed through banks during the 10-month period increased to $19.87 billion, or 6.2 percent over the amount sent in the same period last year.
The central bank earlier said that the difference in the monetary policies of a fast expanding US economy and the weaker Japanese and European economies may make yields in the local bond market and the peso less attractive to foreign investors.