The peso pierced through the P49-per-greenback boundary and strengthened to nearly three-year high on the back of improving global market risk appetite that resulted in gains in emerging markets.
The local currency gained 20 centavos to close at 49.80 from 50 flat on Thursday. It was its strongest level since it closed at 49.63 against the greenback on June 15, 2017. Total volume traded stood at $1.011 billion, up significantly from $602 million in the previous day.
Michael Ricafort, chief economist of the Economics and Industry Research Division of the Yuchengco-led Rizal Commercial Banking Corp., said in a report the stronger close of the peso happened “amid the continued decline in the US dollar versus major global currencies… ”
He also said the improved global market risk appetite led to “gains in emerging markets such as the Philippines, on some optimism recently about a quicker economic recovery as more countries around the world further reopen their respective economies.”
Ricafort cited the further easing of COVID-19 new cases and deaths in the United States, some European countries and in some Asian countries.
Earlier, amid the onslaught of the pandemic, the interagency Development Budget Coordinating Committee maintained the assumptions for the foreign exchange rate for 2020 to 2022 at P50 to P54 against the US dollar.
The Department of Finance said in previous report the peso remained firm and almost steady from its 2019 year-end level against the greenback despite the rising risks in the global economy, heightened by the spread of the coronavirus disease 2019 and the collapse of global stock markets.
In an economic bulletin, the DoF said as of April 15, 2020, the Philippine peso ranked third among the three currencies in Southeast Asia that maintained their value against the US dollar.
“The main reasons for the peso’s growing strength and stability are the country’s strong balance-of-payments position and rising gross international reserves,” the DoF said.
The Philippines had a balance of payments surplus of $7.844 billion in 2019, which is 2.2 percent of GDP, the highest since 2012.
Meanwhile, the gross international reserves rose to $88.2 billion as of end-February 2020, 6.5 percent higher than the same period last year and equivalent to 7.8 months of imports of goods and services.
The GIR level was also 5.1 times the country’s short-term external debt.
“Strong macroeconomic fundamentals support the country’s financial position. The BOP surplus in 2019 was the highest in recent history. Manageable budget deficits and prompt adjustment of monetary settings in response to current developments help maintain investor confidence,” the DoF said.
Fitch Solutions, a unit of Fitch Group, said in a report the peso would continue to be resilient this year, averaging at 51.70 against the greenback despite the volatility in global financial markets caused by the spread of COVID-19.
“We at Fitch Solutions maintain our forecast for the Philippine peso spot rate to average P51.70/US$ in 2020, given the relative resilience of the peso to wider emerging market currency weakness,” Fitch Solutions said.
“Indeed, in the short term we expect the peso to depreciate only moderately as its fundamentals remain supportive amid uncertainty surrounding the Covid-19 outbreak,” it said.
The peso ended 2019 at 50.635 per dollar. The closing at the last trading day of 2019 was P1.945 stronger compared to 52.58 a year ago.