Asian currencies battered; peso hits P50 per US dollar

By Riza Lozada

The peso recovered somewhat on Friday closing at 49.84/$1 from Thursday’s close of 49.98 after touching P50 per dollar on the same day, the weakest since Nov. 20, 2008, when it traded at 49.99/$1.

Currency traders forecast the peso to remain steady or slightly lower toward the end of the month while recovering in December in anticipation of the Federal Open Market Com­mittee (FOMC) meeting next month.

“It will be a shallow strengthening of peso, if it does,” the trader said.

Asia’s emerging markets have faced outflows since Don­ald Trump won the US presidential election.

“Emerging markets glob­ally are experiencing fund withdrawals, but what makes the Philippines different, or vulnerable, is its valuation,” said Smith Chua, chief in­vestment officer at Bank of the Philippine Islands, the na­tion’s second-biggest money manager with the equivalent of $12 billion in assets under management.

“The foreign-exchange movement has also been a significant factor for overseas investors. As the year is head­ing to a close, some of them want to lock in their gains before the peso weakens fur­ther,” he added.

The last time the peso neared 50 to the dollar in 2008 was when the global finan­cial system was melting down, prompting the Bangko Sentral ng Pilipinas (BSP) to raise inter­est rates to defend it.

Other currencies in the re­gion have not been spared, with Malaysia’s ringgit approaching its weakest level since 1998 when the Asian financial crisis occurred. The Indian rupee was also trading near the re­cord low it reached in August 2013.

Finance Secretary Carlos Dominguez III said the weak peso was an expected reaction of the local currency to the an­ticipated early rate increase by the US Federal Reserve, with other Asian currencies also moving in the same direction.

“We are watching the cur­rency movements very closely. We seem to be moving in the same direction as the other currencies. We just want to avoid abrupt changes in the ex­change rates,” Dominguez said.

But he added that the country’s rock-solid macro­economic fundamentals will enable the domestic economy to survive external shocks such as higher US interest rates and a stronger dollar.

Undersecretary Gil Bel­tran, chief economist at the Department of Finance (DOF), said the strengthening of the dollar against the peso “is ex­pected as an impact of the Fed normalization.”

“The peso is just normal­izing. It was P57 per the US dollar in 2004. All other cur­rencies are moving in the same direction,” he said.

With interest rates on American government bonds now rising, investors have be­gun shifting their focus on the United States, which means that countries like the Philip­pines, Malaysia, Korea, Thai­land and other Asian econo­mies are seeing their currencies weakening against the dollar.

The Hongkong and Shanghai Banking Corp. (HSBC) has lowered its fore­cast for the baht to 35.70 to the dollar by year-end, down from an earlier forecast of 34.60.

In an earlier report, the Wall Street Journal said the yen “dropped to its weakest level in five months against the dollar even though Japan’s economy grew at a better-than-expected rate of 2.2 percent in the third quarter.”

It reported that, “the yen was last down 0.8 percent at ¥107.49, continuing its slide since the US election outcome sparked a broad-based rise in the dollar against major cur­rencies.”

“The Indonesian rupiah, the Korean won and the Indi­an rupee were among several emerging-market currencies to suffer against the US dol­lar (last week), while China’s central bank set the yuan at a more than seven-year low ver­sus the greenback in mainland markets,” the Wall Street Journal reported.