Governor Benjamin Diokno said the currency’s sustained strength would keep basic commodity prices steady, as it will reduce the effect of exchange rate fluctuations passed on to Philippine consumers.
In recent weeks, the peso has been trading at the average level of ₱48 per dollar. It was finishing Thursday’s trade at ₱448.63. For the peso to rise to this stage this is the first time in three years.
The peso has risen by 4.24 percent since the beginning of the year to close at a rate of 448.58 as of August 19, relative to the 2019 closing rate of half 50.64 relatives to the greenback.
The Currencies Gained Relative Strength
The BSP said peso against other Asian currencies also appreciated 4.24 percent. Only the Japanese yen, the new Taiwan currency, and the Chinese yuan gained relative strength. In addition, it was against the currency besides the peso.
Diokno said the peso has drawn strength from what he called the country’s “sound macroeconomic fundamentals”. It included the benign inflation environment, a strong and resilient banking system, a prudent fiscal position, and a sufficient level of international reserves.
The country’s improving credit rating. It was recently upheld by international credit raters and also boosted investor confidence, he said.
“The recent appreciation of the peso has also tempered the BSP’s latest inflation forecasts, offsetting the impact of higher international oil prices,” the BSP chief added during the latest GBED Talks.
On the other hand, the peso will need some help from the gradual reopening of the economy.
“Favorable investor optimism over the fundamentals of the economy aims to benefit the currency in the midst of lower inflows due to the COVID-19 pandemic. For instance, exports, tourism receipts, and remittances.
Inflation, or how fast basic commodity prices rise in a given timeframe, has averaged from January-August at 2.5 percent. This is well inside the 2020 goal range of 2-4 percent. Full-year inflation is seen settling at 2.6 percent.