STRONG macroeconomic fundamentals will continue to give the peso the stability a currency needs, according to government economic managers, but an analyst believes monetary authorities will have to tap its dollar reserves to keep the currency stable.
On Wednesday, the peso returned to a seven-year low of P48.25:$1 after gaining some ground on Tuesday at P48.17:$1. The Philippine currency first hit its weakest level is seven year on Monday.
The peso is so far the worst performing currency in the region, but the country’s fundamental have not moved one or another, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said.
“It is the same macroeconomic policies that produced a resilient economy in the last so many years. It is the uncertainty, the negative market sentiments that is bringing the peso down,” he said at the Stratbase-ADR Institute (ADRi) for Strategic and International Studies forum on Wednesday.
“But you need to understand that this does not indicate that foreigners have already left the Philippine markets. We have to look at another indicator—the interim peso deposits,” he said.
Guinigundo said interim peso deposits are where new investments are brought in or those liquidations coming from government securities and the stock market.
“The situation today is that the interim peso deposit has not broadly changed. It’s still at more than P200 billion, representing liquidations from the stock market and the government securities market,” he said.
The BSP official noted the peso is still relatively stronger than the P55:$1 level in 2005 when the government declared a deficit crisis.
“While the peso has moderately depreciated in nominal terms in recent weeks, the peso in real terms is still very strong, which deters competitiveness,” Chua said.
“This means that the depreciation in recent weeks is welcomed as it will help improve export competitiveness and value of remittances, which benefits around 40 percent of the economy,” he added.
Another finance undersecretary, Gil Beltran, said the peso is seeking its appropriatevalue after appreciating significantly in previous years.
“The GIR (gross international reserves) at $85.6 billion, which is equivalent to 10.5 months of imports, is higher
relative to Asean (Association of Southeast Asian Nations) and should not be a cause for alarm,” Beltran said.
“In times of excessive peso appreciation (2012), Tetango held the deluge of foreign funds to help defend the 40 handle. Throughout the last few years we’ve witnessed the same narrative of BSP defending on both the top side and the bottom to build on GIR in good times and to flood the market with foreign exchange liquidity to calmdepreciation swoons,” he said.
Tetangco’s virtue of building the defenses early on will pay dividends now that winter is here, Mapa noted.
“Expect Tetangco to resort to heavy foreign exchange presence in the next few weeks to keep the peso from straying too far from the proverbial middle of the regional pack,” he said. (M. Carballo, MS)