Boosted by remittances from overseas Filipinos and strong portfolio investments by foreign fund managers, the peso breached the 41:$1 mark to end the trading session at 40.87 to a dollar – a four-and-a-half-year high.
Intra-day, the Philippine unit reached 40.85:$1 on the Philippine Dealing and Exchange Corp., where foreign currencies are traded. Tuesday’s turnover totaled $899.52 million, PDEx records showed.
The peso last traded below 41 to a dollar on March 10, 2008 when it closed at
40.81, according to Central Bank data.
“The peso has indeed appreciated faster than regional currencies have, but the volatility of the peso has been maintained at the middle of the range [compared with those of key currencies in the region],” Bangko Sentral Gov. Amando Tetangco Jr. told reporters Tuesday.
Apart from remittances, Tetangco noted that investor confidence remains buoyant especially on news that debt-riddled Greece is about to get another bailout package from the European Union.
Remittances reached $17.3 billion as of end-September, up 5.7 percent year-on-year, according to the Central Bank. In September alone, remittances totaled $2 billion.
Meanwhile, hot money or foreign portfolio investments plunged to $40 million in October from $402 million posted in September. There was a lot of profit-taking in the stock market, the bank noted, with the main index reaching its 30th all-time high this year on Tuesday largely on the strength of foreign funds.
Tetangco said the Bangko Sentral will closely monitor the forex market and step in if the exchange rate movement needs policy action.
Dealers, who asked not to be named as they were not allowed to talk to the media, noted the peso would have been stronger if not for Bangko Sentral intervention.
The Bangko Sentral policy largely allows market forces to determine the peso rate of exchange against the dollar, but the central bank can also exercise the option to buy or sell currencies in the market to avoid potentially destabilizing movements of the peso.
Extreme volatility in the currency exchange rates can have a detrimental impact on the economy, according to the Bangko Sentral.
The BSP is continuously intervening in the market in a moderate way, dealers noted. — With Rouchelle Dinglasan/VS/YA