Peso appreciates further

The peso gained seven centavos to close at a strongest level in more than three years amid the rising foreign borrowings by the national government and private sector to combat the impact of the COVID-19 pandemic.

The local currency closed at 49.47 yesterday from Tuesday’s close 49.54 to $1. This was the strongest level for the peso since closing at 49.40 to $1 in June 5, 2017.

It reached an intraday low of 49.63 before appreciating to hit an intraday high of 49.46 to $1. Volume was thinner at $760.73 million from $1.09 billion last Tuesday.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said during the online PreSONA forum the peso has remained stable supported by the country’s strong external payments position.

“While most regional currencies have depreciated against the dollar, the peso has appreciated,” Diokno said.

Diokno added the country’s balance of payments (BOP) recorded a surplus of $4 billion from January to May, while the gross international reserves (GIR) stood at an all-time high of $93.3 billion in end May.

“Another source of strength for the economy is our robust external payments position, which provides adequate buffers against global risks and shocks,” Diokno said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the strength of the local currency could be traced to the ample supply of the greenback amid rising government and corporate foreign borrowings.

“The peso was stronger recently after a series of foreign borrowings or foreign bond issuance by some large Philippine companies,” Ricafort said.

Ricafort added the dollar proceeds would further boost the country’s GIR as well as BOP surplus.

“Markets anticipating for the latest trade balance data on July 10, as well as the latest GIR and overseas Filipino workers remittances data in the coming days as a source of new leads for the peso,” Ricafort said.

Ricafort said the country’s trade deficit is expected to narrow further amid the slump in global trade amid the pandemic, as well as the continued rise in the GIR to record levels.

The economist also cited the slight decline in global oil prices amid concerns that the spike in new COVID-19 cases in the US.