The peso remains stable, backed by the country’s strong macroeconomic fundamentals and despite external headwinds from tighter monetary policy actions by the US Federal Reserve and inflationary pressures from heightened global fuel prices, the Department of Finance said over the weekend.
The DoF said in an economic bulletin on Asian currencies over the weekend that the Philippine peso continued to be in the middle of the pack of the most stable currencies in Asia as the region recovered from the pandemic and imports of capital goods soared.
The peso depreciated 5.4 percent in 2021, ending the year at ₱50.77 against the US dollar from ₱48.04 at the end of 2020. It is ranked as the 8th strongest among 11 Asian currencies in one of the most open and fastest recovering economies in the world.
Three currencies including the Japanese yen, the Thai baht and the South Korean won depreciated faster.
“Like other currencies in the region, the local currency weakened vis-à-vis the dollar in 2022. Year-to-date, the peso depreciated by 2.70 percent against the dollar, lower than the average year-to-date 4.67 percent depreciation of the group,” DoF said.
The peso in 2022 was one of the strongest Asian currencies, ranking second only to the Vietnamese dong.
“The volatility of the peso also tracked its regional peers. The volatility of the peso-dollar exchange rate, as estimated by the coefficient of variation, declined from 1.16 in 2020 to 1.05 in 2021, mirroring the decline of the regional median from 0.99 to 0.90 over the same period,” it said.
The volatility of the peso-dollar exchange rate declined further to 0.81 year-to-date, lower than the median of 0.86.
The country’s gross international reserves of $106.76 billion at the end of April could cover 9.4 months of imports of goods and services. Additionally, the country’s exposure to external debt, measured in percent to GDP, is the lowest among major Southeast Asian economies.
“Prudent macroeconomic management, sustaining the vaccination program, and safely reopening the economy, among others, will be important in maintaining investor confidence as recovery gains traction and the economy chugs its way past its pre-pandemic level,” the DoF said.
The peso on Friday breached the 53-per-dollar level, its weakest in almost three and a half years, as financial markets expect a more aggressive rate hike by the US Federal Reserve this week.
The peso lost P0.05 to close at 53 per greenback from 52.95 on Thursday. It was the local unit’s lowest level since the 53.10 on Dec. 20, 2018. Total volume turnover reached $949.3 million on Friday, up from $732.62 million a day before.
The inter-agency Development Budget Coordination Committee, in its latest macroeconomic assumptions, projected the peso-dollar exchange rate to range from 51 to 53 this year. It pegged the peso-dollar rate assumption at 50 to 53 from 2023 to 2025.
Earlier, US Fed officials hinted of an aggressive rate hike in the coming months to bring down the most rapid pace of inflation in 40 years.