Philippine Peso Has Worst Week Since May as Remittances Slump
The Philippine peso completed its worst week since May after official figures showed the pace of growth in overseas remittances dropped to a 15-month low.
Funds sent by Filipinos abroad rose 4.2 percent in June from a year earlier, the least since March 2011, the central bank reported on Aug. 15. The government said this week it’s looking at raising funds without fueling currency gains that may hurt exporters. Overseas sales and remittances account for about 30 percent of the $225 billion economy.
“There seems to be a preference at the central bank for a weaker exchange rate and for gains to be in line with the region to keep exporters, overseas workers and call centers competitive,” said Ricky Cebrero, head of treasury at Philippine National Bank (PNB) in Manila.
The peso fell 1.3 percent this week to 42.42 per dollar at the close in Manila, Tullett Prebon Plc prices showed. That’s the biggest decline since the five-day period ended May 18. It dropped 0.3 percent today. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 6.5 percent.
The peso pared this year’s gains to 3.4 percent, the second-best performance among Asia’s 11 most-traded currencies.
The government is coordinating with the central bank on how it can use the nation’s foreign-currency reserves to repay some overseas debt ahead of schedule, Finance Undersecretary Rosalia de Leon said on Aug. 15. It is also considering selling bonds targeting onshore foreign-currency deposits so as not to bring in “additional dollars on a net basis,” she said.
Current levels are good enough to spur some dollar sales, said Cebrero who predicts the peso will strengthen to 41.50 by year-end. “Philippine fundamentals remain very strong,” he said.
Foreign reserves climbed to a record $79.3 billion in July, central bank data show. Export growth slowed to 4.2 percent in June from a year earlier, compared with 19.7 percent the previous month.
Bonds gained as central bank Deputy Governor Diwa Guinigundo said in Manila today that authorities will assess if they have scope to reduce banks’ reserve requirement ratio amid well-anchored inflation expectations.
The yield on the 5.875 percent bonds due August 2015 fell 11 basis points, or 0.11 percentage point, to 3.9 percent, according to midday fixing prices at Philippine Dealing & Exchange Corp.
Local financial markets will be shut on Aug. 20 and Aug. 21 for holidays. Trading resumes on Aug. 22.
To contact the reporter on this story: Clarissa Batino in Manila at firstname.lastname@example.org