The peso slid for a third day to close at a new 10-year low against the US dollar, as the widening trade deficit became a concern among traders.
The local currency lost seven centavos to settle at 50.77 a dollar Tuesday, down from 50.70 a dollar Monday. It was the peso’s weakest level in more than 10 years, since it averaged 50.81 a dollar on Sept. 1, 2006. Total volume turnover reached $653 million Tuesday, up from $256 million Monday.
ING Bank Manila senior economist Joey Cuyegkeng said in a report the peso depreciated again, moving in an opposite direction of other Asian currencies.
“Almost all Asian currencies recovered last week from the weakness of the previous week on the back of a dovish view of Fed Chair Yellen’s semi-annual testimony and mostly weak US consumer-related economic reports,” Cuyegkeng said.
“We attribute the underperformance [of the peso] to the wider than expected trade deficit [for May]. The report comes after BSP [Bangko Sentral ng Pilipinas] validated market’s fear that this year could see the first full year current account deficit since 2003,” Cuyegkeng said.
The Philippines posted its biggest monthly trade deficit on record in May 2017, driven by a rapidly-expanding economy. Latest data showed the trade gap widened to $2.8 billion in May, as exports grew 14 percent from a year ago to $5.5 billion while imports rose 17 percent to a record $8.2 billion.
Trade deficit hit $11 billion in the first five months and $26.7 billion in 2016, eating into the country’s current account surplus. Economic managers earlier said import demand in the Philippines was increasing as the government was ramping up its ambitious infrastructure program.
Cuyegkeng said the upcoming second State of the Nation Address of President Rodrigo Duterte on July 24 and his decision to extend martial law in Mindanao might have some implications on financial markets.
“We expect the impact on financial markets to be low considering the latest SWS survey showing a sustained high level of satisfaction for the president,” he said.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. earlier said he was not alarmed by the latest movement of the peso against the US dollar, saying its weakness is “not unusual.”
“It’s actually just reflecting market conditions and underlying fundamentals. We’ve seen nothing particularly unusual about this, it’s the nature of the exchange rate to fluctuate,” Espenilla said.
The peso hit an all-time low of 56.39 a dollar in October 2004.