The peso on Friday strengthened to its highest level against the US dollar in more than four years on the back of more stable global financial markets as economies gradually reopen.
The local currency gained nine centavos to close at 48.22 per US dollar on Friday, up from 48.31 per dollar Thursday. It was its strongest finish in more than four years, or since it settled at 48.19 on Oct. 24, 2016. Foreign exchange volume reached $779 million, up from $661.87 million on Thursday.
Astro del Castillo, managing director of First Grade Finance Inc., a finance and investment company based in Makati City, told Manila Standard that as global financial markets gained, inflows were directed into the country.
“These cause investments to come into the country,” he said, adding the gradual reopening of the economy also buoyed the strength of the local currency.
“The US elections also have positive impact to global financial markets rather than negative,” del Castillo said.
Local equities rose in line with regional markets over the week, following the US elections. The Philippine Stock Exchange index, closed at an eight-month high of 6,685.69 on Nov. 6, representing a 44-percent climb from this year’s bottom of 4,623.42 registered on March 19 at the start of the community lockdown.
The peso pierced through the 49-a-dollar boundary on Aug. 11, 2020 when it closed at 48.92 per dollar. It has stayed within that range since then.
Bank of the Philippine Islands lead economist Jun Neri said Thursday the local currency would likely depreciate near 49 per greenback in the coming months, taking into account the expected recovery of imports as the economy continues to relax border restrictions.
“With the economy slowly reopening, we expect imports to recover further in the coming months in line with the expected improvement in local demand. Hence, dollar demand may pick up and the exchange rate may move closer to the P49 level,” Neri said in a report.
Imports in September contracted for the 17th straight month with -16.5 percent to $7.92 billion. The decline was higher at -21.3 percent in August.
He said a risk to this outlook would be government underspending, especially in the area of infrastructure.
“With businesses still struggling, the lack of fiscal support and public construction may stall the recovery and dampen the demand for capital goods,” Neri said.
Neri said a decline in remittances amid the recession in other countries might exert additional pressure on the local currency.
The Bangko Sentral ng Pilipinas expects remittances from overseas Filipino workers to contract by 2 percent this year, on the prolonged impact of the pandemic to countries where OFWs work.