The peso pierced through the 50-per-dollar level on Friday, the weakest in more than a year, on higher demand for the greenback as imports surged amid the reopening of global markets.
Trading data showed the local currency settled at 50.08 a dollar Friday, down from 49.875 on Thursday. It was the peso’s lowest finish since it closed at 50.19 on June 23, 2020. Total volume turnover reached $859.7 million, down from $1.127 billion on Thursday.
The peso opened Friday’s trading at 50.1 per dollar, touching 50.17 at one point before settling at 50.08 per dollar at the close.
ING Bank Manila senior economist Nicholas Mapa said a strong dollar coupled with the wider-than-expected trade deficit in May might have helped push the peso past the 50 psychological handle on Friday. He said the peso was now down 1.94 percent “for the relatively young month of July.”
The Philippine Statistics Authority said Friday the country’s trade-in-goods deficit in May widened by 109.7 percent to $2.76 billion from the $1.3-billion shortfall in the same month last year, amid the double-digit expansion in both exports and imports.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the direction of the peso-dollar exchange rate would largely hinge on the recovery of the economy and imports, after the quarantine classification in NCR Plus was relaxed to GCQ on May 15, 2021, alongside with additional measures to re-open the economy from lockdowns.
“The peso exchange rate could range 48.00 to 50.00 levels in 2021 to 2022 amid the expected economic recovery during the period…,” Ricafort said.
Ricafort said the strength of the dollar was due to the anticipation for the seasonal increase in importation activities in the third quarter.
“However, after that, the US dollar/peso exchange rate is expected to seasonally go down in the fourth quarter with the expected seasonal increase in OFW remittances and conversion to pesos especially during the Christmas season…,” he said.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno on Thursday downplayed the recent weakness of the peso against the dollar, saying the currency continued to be driven by supply and demand conditions.
He said the country’s gross international reserves remained hefty, on the back of the strong inflows of remittances and receipts from business process outsourcing industry.
Mapa said Diokno’s statement suggested that the BSP would likely withhold resorting to costly policy rate hikes to help stem the depreciation trend of the peso.
“However, we could see BSP changing its tune should the current weakness go on for a considerable period of time. In the near term, we expect BSP to stick to its accommodative stance given that the economic recovery is still in its nascent stages as import levels, although rising, are still below pre-COVID levels,” Mapa said.
“Meanwhile, we expect continued pressure on the peso in the near term as import demand accelerates especially if exports remain hampered by shipping bottlenecks,” Mapa said.
The interagency Development Budget Coordinating Committee composed of the heads of the Department of Finance, Department of Budget and Management, and National Economic and Development Authority in May set the peso-dollar exchange rate assumption at 48 to 53 per dollar for 2021 to 2024.