The Philippine peso fell to a new 18-month low, closing at 58.27 against the US dollar Tuesday amid strong investor appetite for the greenback.
It was also weaker than Monday’s 57.90 against the dollar with volume turnover reaching $1.6 billion, up from $1.2 billion, data from the Bankers Association of the Philippines showed.
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said the peso weakened beyond 58 to the dollar in line with the movement of other regional currencies.
“The dollar continued to strengthen as the Federal Reserve signaled delay in cutting interest rates,” Remolona said.
“The BSP continues to monitor the foreign exchange market but allows the market to function without aiming to protect a certain exchange rate,” he said.
Remolona said the BSP would participate in the market when necessary to smoothen excessive volatility and restore order during periods of stress.
The general strength of the dollar is also in line with rising commodity prices. Copper, a key gauge of the state of the economy owing to its widespread use, hit a record above $11,400 Monday, while gold was also hanging just short of its own peak touched on the same day. Silver was around an 11-year high.
The peso’s weakness also came after the Bangko Sentral ng Pilipinas (BSP) reported that the balance of payments (BOP) position yielded a deficit of $639 million in April, higher than the $148 million shortfall recorded in the same month last year.
“The BOP deficit in April 2024 reflected outflows arising mainly from the national government’s net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the BSP said in a statement Tuesday.
The April figure brought the four-month BOP level to a $401-million deficit, a reversal from the $3.3-billion surplus recorded a year earlier.
Preliminary data showed this four-month BOP deficit reflected the government’s repayments of its foreign loans and the continued trade in goods deficit.
The BOP position also reflected a decrease in the gross international reserves (GIR) level to $102.6 billion as of end-April from $104.1 billion a month earlier.
The BSP said, however, the latest GIR level still represented a more than adequate external liquidity buffer equivalent to 7.6 months’ worth of imports of goods and payments of services and primary income.
It was also about 5.8 times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity.
The BSP earlier raised the projected 2024 BOP surplus to $700 million on positive inflows of remittances, outsourcing revenues and tourism receipts. This was higher from an earlier estimate of $400-million BOP surplus for the year.
The actual surplus reached $3.7 billion in 2023, a reversal of the $7.3-billion deficit in 2022.
The BSP also projected a lower current account deficit of $6.1 billion this year, compared to the previous forecast of $9.5 billion. In 2023, the actual current account deficit amounted to $11.2 billion, lower than $18.3 billion in 2022.
