Peso strengthens on profit-taking, remittances

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THE peso recovered against the dollar on profit-taking, closing at its high with the US unit’s value taking a hit from surging remittances.

The peso ended yesterday’s session at P51.45 against the dollar, compared with P51.58 on Thursday.

The peso opened weaker at P51.63, falling to an intraday low of P51.76, before rallying at the close.

Volume rose to $1.12 billion from $878.15 million on Thursday.

“Although the dollar was strong overnight, we saw some profit-taking in the afternoon session,” a trader told BusinessWorld over the phone, adding that there was “some good selling from remittances.”

Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines, said: “The peso appreciated [yesterday], as investors locked in the dollar’s recent gains ahead of key US labor data.”

January US nonfarm payrolls are due for release late Friday, with the market consensus centered around an increase of up to 180,000 jobs from 148,000 jobs in December.

Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, said: “It seems investors are looking at other stories like the up and coming strength of the eurozone’s economy.”

Despite the peso’s recent weakness, the central bank has said that the currency is supported by healthy fundamentals.

“The peso is not expected to melt down because the underlying economic fundamentals of the economy are healthy,” central bank governor Nestor A. Espenilla, Jr. said, citing the”manageable” balance of payments (BoP) deficit.

The balance of payments (BoP) position was a $917-million surplus in December, a reversal from the $214-million deficit in December 2016, and the $44-million deficit booked in November.

The December surplus trimmed the full-year 2017 deficit to $863 million from the $1.78 billion seen in the previous month.

“The BOP deficit is very manageable and is but a reflection of an economy that’s growing rapidly in a way that is sustainable,” Mr. Espenilla said.

The country’s central banker added that the peso is far from any foreign exchange crisis, given the country’s large gross international reserves (GIR) as well as the investment-grade rating.

Preliminary data from BSP showed the country’s GIR totalled $81.467 billion last December, up from November’s $80.309 billion and $80.691 billion logged in December 2016.

“We are very far from any foreign exchange crisis given our large GIR buffer and secondary buffers as well as investment grade-rating that guarantees ready market access for any official and commercial financing requirement.”

In December, credit rating agency Fitch Ratings upgraded the country’s issuer default rating to “BBB” from “BBB-” with a “stable” outlook, a notch above the minimum investment grade and is aligned with the ratings earlier given by Moody’s Investors Service and S&P Global Ratings. — Karl Angelo N. Vidal