The peso touched the 50-a-dollar level Thursday, closing near a 10-year low, following the recovery of the greenback ahead of Donald Trump’s inauguration as president.
The peso lost 19 centavos to close at 49.98 a dollar Thursday, the weakest since it settled at 49.99 a greenback on Dec. 20. It reached an intra-day low of 50 a dollar, on a volume turnover of $560 million.
Bangko Sentral’s intervention in the currency market was seen at 50 a dollar. The last time the peso breached the barrier was Nov. 24, 2016.
ING Bank senior economist Joey Cuyegkeng said the stronger dollar movement was due to the positive sentiments in the US Federal Reserve.
Cuyegkeng said the dollar climbed against other currencies because of “Fed Chair [Janet] Yellen’s positive view of the US economy that is near or at Fed’s goal.”
“This resulted in higher US yields,” he said.
Yellen breathed life back into the greenback with a speech in which she said the US economy was meeting the central bank’s inflation and employment goals, and was confident it would push on.
Cuyegkeng said traders were also moving cautiously ahead of Donald Trump’s inauguration on Friday.
“Local demand for US dollar continues to finance imports,” he said.
Strong imports resulted in high merchandise trade deficit and balance of payments deficit last year.
Bangko Sentral said the Philippines posted a BoP deficit of $420 million in 2016, missing the government’s revised target of $500-million surplus.
The deficit was also a reversal of the $2.616-billion BoP surplus registered in 2015.
Data showed that in December alone, the BoP yielded a deficit of $214 million, a reversal of the $481-million surplus in the same month in 2015.
BoP summarizes the country’s economic transactions with the rest of the world, with a deficit indicating foreign exchange payments outstripping receipts and a surplus the reverse.
Persistent surpluses help build up the country’s gross international reserves, an ample supply of which helps prop up the peso vis-à-vis the US dollar and keep domestic inflation at bay.
Data from the Philippine Statistics Authority showed merchandise trade deficit widened to a record $22.4 billion in the first 11 months of 2016 from $10.7 billion a year ago, as imports grew strongly and exports sank.
The trade deficit was offset by strong inflows of remittances, business process outsourcing revenues, tourism receipts and foreign investments.
The country attracted $5.9 billion in foreign direct investment inflows in the first nine months.
Foreign portfolio investments or ‘hot money’ posted a net inflow of $354 million last year, surpassing the $1.1-billion net outflow target set by Bangko Sentral.
Data showed the 2016 figure also reversed the $599.69-million net outflow registered in 2015.
Remittances from migrant Filipino workers likely reached $26.6 billion in 2016 while the BPO sector contributed more than $20 billion in services exports.