The peso is likely to keep rising as long as economic conditions improve, Finance Secretary Margarito Teves said yesterday as the currency hit another seven-year high against the dollar.
“For as long as the macroeconomic fundamentals continue to improve the peso will likely continue to improve,” Teves said.
At yesterday’s trading at the Philippine Dealing System (PDS), the peso broke into the 44 to $1 territory during midday trading to hit 44.990 before closing at 45 to the dollar. Transaction volume amounted to $637.50 million on an average rate of 45.090 to $1.
Yesterday’s closing rate was 28 centavos higher than Wednesday’s close of 45.28 and was the highest since the peso last touched the 44.980 to $1 level in August 2000.
Teves said the government was not interested in imposing capital controls to cap the peso’s rise.
Market traders said the peso’s strength was the direct result of heavy foreign exchange inflow into the capital market supported by the continued inflow of remittances from overseas Filipino workers (OFWs).
The relative strength of the peso also became even more pronounced due to the inherent weakness of the dollar which has been dropping to record lows against the Euro as housing woes in the US threatened to worsen.
According to analysts, the peso was packing up momentum at the moment but there could be tempering effects as
the market anticipates a possible increase in US interest rates.
Should the US Federal Reserve Board decide to increase US rates, funds that have been flowing into the equities market could flow right out as they take advantage of better earnings in the US.
From January to June, data from the Bangko Sentral ng Pilipinas (BSP) said the peso was averaging at 46 to the dollar.
Net foreign portfolio investments continue to enter the country, reaching a record high of $870 million in June to bring the total net portfolio investments in the first semester to $2.5 billion, or over three times higher than last year.
Data from the BSP show that registered foreign portfolio investments in June alone surpassed the previous highest monthly total of $580.8 million recorded in May.
BSP Governor Amando M. Tetangco Jr said the central bank registered a total gross inflow of $1.9 billion in June which went mostly to shares listed at the Philippine Stock Exchange—one of the hottest exchanges in the region this year.
Tetangco said 82 percent or close to $1.6 billion of June inflows went to PSE-listed shares where holding and property firms as well as listed banks captured 73 percent.
The remaining 16 percent, according to Tetangco, were placements in peso-denominated government securities, primarily Fixed Rate Treasury Notes or FXTNs where investments amounted to $294.3 million. Placements in peso time deposits made up the remaining $38 million or two percent of total gross inflows.
The peso is the top performing currency in Southeast Asia this year, up over 8.5 percent since the start of the year, due to record inflows of remittances from millions of overseas workers and strong foreign portfolio investments.