HONG KONG/MANILA/SINGAPORE — Asian emerging market currencies have been having their best year since before the 2013 taper tantrum, bolstered by pace-setting growth rates and attractive yields.

But the Philippine peso has been left out of the party — ironically after it held up better than peers, including Indonesia’s rupiah back in 2013.

Unless things change, it’ll be a fifth straight year of declines for the peso, which is down 3.4% so far in 2017 versus a 7.9% rise for Thailand’s baht.

For now, that slide may be set to deepen as traders test the tolerance levels of Philippine policy makers, who have so far refrained from actions to prop up the exchange rate.

“The market appears to have turned to the view the Philippine authorities do not care about the PHP,” said Callum Henderson, managing director of global markets-APAC at Eurasia Group UL Limited in Singapore.

“In my view that is wrong, but recent statements may not be enough and the central bank may have to match words with deeds.”

LOCAL WHIPPING BOY
It’s hard to make a concise case for why the peso is so forlorn, given the country’s growth trending above six percent the past half decade.

Currency analysts list a series of reasons.

The current-account deficit is set to widen because of ambitious infrastructure plans, and there is uncertainty over the passage of tax reforms that are winding their way through the legislature.

Political upheavals such as President Rodrigo R. Duterte’s war on drugs are harming sentiment.

Battles between government troops and Islamic State-linked militants in the southern city of Marawi have prompted additional caution among investors, and the cost of the military activity is putting pressure on the budget deficit.

“When you’re looking at other currencies in the region, it’s less appealing from that perspective,” said Stephen Innes, head of trading for Asia Pacific with Oanda, in an interview in Hong Kong on Aug. 17.

“You have the current account increasing, the waves of instability in the political landscape, and it just becomes the local whipping boy.”

NatWest Markets, ANZ Banking Group and Goldman Sachs Group Inc. are among those who are bearish on the currency.

Philippine Finance Secretary Carlos G. Dominguez III said last week that the peso’s slump is mainly due to a deteriorating trade outlook because of rising imports of capital goods, which is “normal for a country that is growing very fast.”

On Thursday, GMA News reported that Economic Planning Secretary Ernesto M. Pernia had said an exchange rate of 52 to the dollar would be acceptable.

Bangko Sentral ng Pilipinas Governor Nestor A. Espenilla, Jr. said on Friday that there will be no free fall for the currency as the economic fundamentals are strong.

The peso has become an obvious target for selling as tensions have risen, Mr. Innes said — not only domestically but more widely with international concerns such as North Korea’s nuclear saber-rattling. — Bloomberg

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