The local currency’s newfound strength should prove short-lived, according to a private bank economist, as conditions turn less favorable in the coming weeks.
In a research note, ING Bank Manila Senior Economist Joey Cuyegkeng said seasonal factors and renewed interest in the US dollar could bear down on the peso over the near term no matter that its strength significantly recovered from weeks of trading in the 51-per-dollar territory.
Data from the PDS Group showed the peso once again trading at the 50-per-dollar level in recent days, completing Monday’s trade, for example, at 50.905 to a dollar. The peso earlier pushed past 51, its lowest since 2006.
Cuyegkeng said, while the peso gained strength last week along with most Asian currencies, acquisition-
related inflows—along with higher August inflation and positive external developments—helped strengthen the peso in recent days.
“We had anticipated acquisition-related capital inflows as deadlines approach…. Once acquisition-related inflows have been absorbed by the market, seasonally high import demand may again dominate and push the Philippine peso weaker as early as late next week or end of this month,” Cuyegkeng said. According to him, the demand for US dollars will return to dominate the market once the inflows have been absorbed and liquidity conditions normalize.
One other local analyst also said capital goods imports needed to meet the government’s infrastructure buildup program have contributed to the recent slide in the value of the local currency.
Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. previously said the modest and gradual depreciation of the peso is a reflection of a “dynamic price-discovery process” formed on the back of strong and sustained imports growth as the economy continues to expand.
Time and again Espenilla repeatedly expressed the BSP’s “readiness to intervene” and “neutralize the activity of speculators in the market” to smoothen excess volatilities in the foreign-exchange market.
On Tuesday the BSP suspended check-clearing operations following the announcement of work suspension in government and private offices in Metro Manila, allowing both the stock and foreign-exchange markets to suspend trading, as well.