Philippine peso zooms to P48 vs dollar, strongest in almost 4 years

The Philippine peso strengthened to a nearly 4-year high of P48.92 to $1 on Tuesday, August 11, as the global economy suffers from the recession triggered by the coronavirus pandemic.

This is the strongest for the local currency since it closed at P48.66 against the greenback on November 10, 2016.

The lack of dollar demand, as well as the pandemic’s impact on the global economy, were among the reasons cited by UnionBank chief economist Carlo Asuncion for the peso’s strength.

Asuncion also cited the government’s recent sale of P516.3 billion worth of retail treasury bonds, which continued to contain portfolio flows.

The peso may not return to pre-pandemic levels in the near term as the Philippines’ current account remains in surplus, explained ING Bank Manila senior economist Nicholas Mapa.

Data from the Bangko Sentral ng Pilipinas showed the country’s current account swung to a surplus of $92 million in the 1st quarter from a deficit of $1.7 billion from the same period a year ago.

A current account records a nation’s transactions with the rest of the world, specifically its trade in goods and services, its earnings on investments, and payments made over a period of time.

Mapa added that the appreciation could also be attributed to the implosion of imports, mainly due to the lack of economic activity during the recession.

A strong peso means that the Philippines can purchase imports at a more attractive rate. But it also means that the country’s exports would not be enticing for other countries, since these would be more expensive.

Moreover, Filipino families relying on overseas remittances will get less due to the peso’s strength. – Rappler.com