Peso outperforms Asian currencies despite coronavirus risks — DOF
MANILA, Philippines — The Philippine peso so far continues to show immunity from the coronavirus economic fallout, outperforming other Asian currencies as the country's dollar reserves rise, the chief economist of the finance department said on Thursday.
In an economic bulletin, Finance Undersecretary Gil Beltran said the local unit appreciated by 2.21% against the US dollar from January 1 to July 8, ranking first in strength among Asian countries tracked by the agency.
Apart from the peso, other Asian currencies that showed strength year-to-date were the Hong Kong dollar (2.07%), Taiwan dollar (1.68%) and Japanese yen (0.87%), data showed.
As government turns to debt to boost its financial war-chest against the health crisis, a strong peso would allow the country borrow and pay obligations abroad without risks of the local currency unnecessarily weakening, which could push up the value of foreign loans.
A flip side of a strong currency, however, is the lower value of dollar remittances from migrant workers abroad, which help propel consumption and investment activity at home. Cash remittances, coursed through banks, are expected to drop 5% annually this year.
Beltran attributed the peso's resilience to the Philippines' ballooning foreign reserves, which hit an all-time high of $93.3 billion in May as hefty dollar loans to fund the government's pandemic response were exchanged for pesos. The central bank sees reserves rising to as much as $95 billion by year-end.
"Despite the pandemic and global economic contraction, strong macroeconomic fundamentals support the country’s favorable financial footing," Beltran said.
The surge in reserves bodes well for the country's external position that gauges the capacity of the government to meet foreign obligations like imports and foreign debts. This is measured through the balance of payments (BOP), which swung to a $3.7 billion surplus in the first five months.
Both a BOP surplus and high reserves provide support to the peso. The local unit has so far traded within or stronger than P50-P54 average band assumed by the economic managers for the year. On Thursday, the peso closed stronger by 6 centavos at P49.41 against the greenback.
"The BOP surplus in 2019 was the highest in recent history and continued through May of 2020. Manageable budget deficits and prompt adjustment of monetary settings in response to current developments help maintain investor confidence," Beltran added.
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