The local currency has remained one of the strongest among Asian countries despite the peso’s recent depreciation against the US dollar, the Department of Finance (DOF) said.
Finance Undersecretary and Chief Economist Gil S. Beltran said the peso depreciated by 1.05 percent against the dollar this year, but still one of the four strongest among 11 Asian currencies.
Based on the DOF data, only China and Vietnam saw their respective currencies appreciating versus the greenback by 1.15 percent and 0.30 percent, respectively.
The peso, on the other hand, was behind’s Indian rupee which depreciated by only 0.72 percent.
Japanese yen was the weakest in the region down 6.12 percent since January, followed by the Thai baht, South Korean won, Indonesian rupiah, and Malaysian ringgit, which all dropped 5.87 percent, 3.18 percent, 2.82 percent, and 2.47 percent, respectively.
Meanwhile, the currencies of Brunei and Singapore—both in dollar—weakened by 1.12 percent.
Likewise, Beltran said the peso was the least volatile currency among Asian countries with available data in 2019.
“The volatility of many currencies increased in 2020 due to the pandemic but the peso remained among the more stable currencies, ranking next to the Thai baht,” Beltran noted.
The volatility, as estimated by the coefficient of variation (CV), of the peso-dollar exchange rate rose from 0.74 in 2019 to 0.92 last year, tracking the trend in Asian currencies.
For the month of June, the peso-dollar CV rose to 0.94 from the 0.82 registered in May.
“This increase in volatility may be traced to the Fed’s indication to start ‘talking about talking’ about a taper, that is, reducing its purchase of government bonds and mortgage-backed securities,” Beltran said.
Last week, the peso dropped to 50.30 per dollar, its weakest since June 2020.
Analysts said the local currency would remain under pressure this year and is expected to stay above the 50 level due to rising volatility, coupled with a spike in imports and oil prices.
But Beltran said the peso would remain relatively stable supported by the country’s strong economic fundamentals.
In particular, the finance official cited that the Philippines’ reserves of $107.25 billion as of May could cover more than a year’s worth of imports.
Furthermore, the country’s exposure to external debt, measured in percent to gross domestic product, is the lowest among major Southeast Asian economies, he added.
“Prudent macroeconomic management, containing the spread of the virus and ramping up the vaccination program, and safely reopening the economy will be important in maintaining investor confidence in the country during this time of pandemic,” Beltran said.
Last week, Fitch Ratings adjusted its outlook for the Philippines' "BBB" investment-grade credit rating to negative from stable.
At present, other credit rating agency such as Moody's Investor Service and S&P Global Ratings have stable outlooks to the country's credit rating.