Peso depreciates to near 11-year low

The peso continued to weaken against the dollar yesterday, shedding another seven centavos to close at its lowest level in almost 11 years.

The local currency closed at 50.77 from Monday’s 50.70 to $1. This was the weakest since it closed at 50.795 to $1 on Aug. 31, 2006.

The peso opened weaker at 50.73 and eventually hit an intraday low of 50.83 to $1.

Volume reached $653 million yesterday, more than double to $255.95 million recorded last Monday.

A trader said the BSP intervened during the morning trade to cushion the fall of the peso.

ING Bank Manila senior economist Joey Cuyegkeng said the peso remains an underperformer in the region as it continued to weaken against the greenback.

Cuyegkeng said the peso also continues to move in the opposite direction from other Asian currencies which strengthened against the dollar last week.

“We attribute the underperformance to the wider than expected trade deficit (for May),” he said.

Cuyegkeng said the market continues to move following reports that the country may experience a deeper current account (CA) deficit this year.

The BSP now expects the Philippines to book a CA deficit of $600 million instead of an $800 million surplus for this year. This would be the first time in 14 years the country would book a shortfall in its current account position.

ING expects the Philippine to post a CA surplus equivalent to 0.2 percent of gross domestic product (GDP) this year.

Cuyegkeng said the coming second State-of-the-Nation-Address of President

Duterte on July 24 as well as the planned extension of the martial law imposed in Mindanao last May 23 would have some implications for the market.

“We expect the impact on financial markets to be low considering the latest SWS survey showing a sustained high level of satisfaction for the President. But there are certain issues that could eventually affect the President’s ratings but are not likely to change the overall rating in the near term,” he said.

Cuyegkeng added support for martial law in Mindanao was high but extending it might generate some concerns now that the Maute group’s threat has been slashed.

Metropolitan Bank & Trust Co. said in its daily views there is persistent retail and corporate demand for the dollar.

Metrobank said trading ranges have been somewhat subdued in the past few sessions with the absence of the central bank.

BSP Governor Nestor Espenilla Jr. earlier said the central bank is letting the exchange rate reflect underlying market conditions.

“We have seen nothing particularly unusual about this, it’s the nature of the exchange rate to fluctuate. As far as the BSP is concerned, we are there, we are managing excessive volatility,” he said.