THE PESO ended almost flat versus the dollar on Wednesday but still logged another near 11-year low due to domestic corporate demand and ahead of the release of local economic growth data and minutes of the US Federal Reserve’s latest meeting.

The peso closed at P51.35 against the dollar yesterday, nearly unchanged from Tuesday’s finish of P51.34-to-the-dollar. Still, it was the local unit’s weakest close in almost 11 years or since it ended at P51.38 a dollar on Aug. 25, 2006.

The peso opened the session at P50.45 against the dollar. Its best showing was at P50.30, while its weakest intraday level was at P51.60 versus the greenback.

Trading volume was at $824.7 million, higher from the $659 million that changed hands in the previous session.

Traders attributed the peso’s performance to strong dollar demand from corporates, with investors also on a wait-and-see mode for local gross domestic product (GDP) data and the Federal Open Market Committee (FOMC) minutes.

The trader also noted they saw the Bangko Sentral ng Pilipinas (BSP) step in during the morning session.

“The movement was generally higher mainly because of higher US retail sales but the profit taking was capped because of investors waiting for GDP data and FOMC minutes,” another trader said.

Official second-quarter GDP data will be released today by the Philippine Statistics Authority, while the Fed’s July meeting minutes was scheduled for release overnight.

“Both reports might be an event and will dictate what the exchange rate will be,” the other trader said.

For today, both traders said the exchange rate could settle within P51.20 to P51.60 range.

CYCLICAL TREND
BSP officials on Wednesday downplayed perceived weakness in the peso-dollar exchange rate, noting that currency movements simply follow a cyclical trend at a time of rising imports and changing market conditions.

“There is justifiable reason for the peso to be where it is right now,” Assistant Governor Johnny Noe E. Ravalo said in a media briefing yesterday at the BSP headquarters in Manila.

“Experience tells us that it is rather a good thing to let the peso move so that it reflects the changing market conditions, the demand and supply.”

However, the BSP official said such figures should also be viewed in the context of “changing” market dynamics.

“The BSP does not target a particular exchange rate number, so there is no magical number beyond which there is a panic button either upwards or downwards,” Mr. Ravalo added. He clarified that the exchange rate adjustments have become “consistent” with the country’s robust economic growth story and price movements, which makes it a lesser cause of concern for the monetary authority.

At the Senate, BSP Governor Nestor A. Espenilla, Jr. stressed that the depreciation of the peso “reflects market concerns” on the country’s current account deficit, and as the currency normalizes after previously gaining strength.

“However, it should be emphasized that the current account position signals the country’s higher propensity to import as the country gears up for higher growth momentum,” Mr. Espenilla told members of the Senate Committee on Finance during a briefing on the P3.767-trillion national budget for 2018.

The Philippines posted a $318-million current account deficit during the first quarter, equivalent to 0.4% of gross domestic product. This compares to a $600-million deficit expected by the central bank for the full year, and shows a turnaround from the $601-million surplus posted in 2016.

Mr. Ravalo added that the pass-through impact of the peso in terms of headline inflation has gone down to 0.14% for every P1, versus a share of 0.48% before the BSP adopted an inflation targeting framework in 2002.

Should the exchange rate see extreme swings, the BSP is ready to intervene by selling units in order to calm the volatility by using the country’s hefty reserve stash to be an active player and rate influencer. — Melissa Luz T. Lopez and Janine Marie D. Soliman

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