The peso sank to a new six-year low, as it approached the 48-per-dollar level Thursday, after investors unloaded shares from emerging markets such as the Philippines on bleak global prospects.
Data from the Philippine Dealing Exchange Corp. showed the peso shed 0.1 percent of its value Thursday to close at 47.94 a dollar from 47.89 a dollar Wednesday.
It was the local currency’s weakest level in more than six years, or since closing at 48.05 per greenback on Sept. 16, 2009, at the height of the global financial crisis.
Total volume traded reached $584 million Thursday, lower than $608.7 million a day earlier.
Analysts said the movement of the peso reflected the drop of local stocks. “The PSEi [Philippine Stock Exchange index] was decimated on Thursday, dropping by more than 2 percent as both foreign and local players unloaded shares, dragging the peso with it,” Nicholas Antonio Mapa, research officer at the Ayala-controlled Bank of the Philippine Islands, said in an e-mailed message.
“As sentiment soured further, investors loaded up on the dollar to seek safe haven,” Mapa said.
ING Bank Manila economist Joey Cuyegkeng said in a statement the peso was likely to be on the defensive mode as the market remained on guard for possible and eventual weakening of the Chinese yuan and continued concerns on growth and low commodity prices.
He said the peso was not immune to market’s concerns and like other Asian currencies posted losses in the first trading week of the year.
Cuyegkeng said the peso might be affected by possible confusion over the signal that the interest rate corridor could deliver. Bangko Sentral ng Pilipinas plans to implement the corridor in the second quarter of 2016.
“An implementation that involves a reduction of the RRP rate even as the SDA rate is steady could be interpreted by the markets as accommodative monetary policy. If the first adjustment in the implementation of the IRC involves a RRP and RP rate cut, then market might misinterpret this as monetary easing which would result to moderate PHP weakness,” Cuyegkeng said.
Meanwhile, Bangko Sentral ng Pilipinas said it was strictly monitoring the Saudi Arabia-Iran conflict, on possible effects of the Middle East situation on remittances from Filipinos working in the region.
Bangko Sentral Deputy Governor Diwa Guinigundo said there could be some challenges to the growth of remittances if the conflict became a full-blown war.
“In the past we had the 1991 Gulf War and the 2003 second Gulf War. Our OFWs were able to move elsewhere and find alternative employments,” Guinigundo told reporters in an interview.
“My concern is that if the Saudi–Iran conflict extends beyond their respective borders and affect all the contiguous jurisdictions, then we will have some challenges to remittances. OFWs may not be able to exercise the same flexibilities they did before that they went to adjacent countries and find alternative employments…. We really have to watch out,” Guinigundo said.
Remittances from the Middle East account for a significant portion of the overall remittances to the Philippines yearly.