Peso Exchange Rate Stable – DOF

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Despite the COVID-19 pandemic’s onslaught, the Philippine peso has remained relatively stable in comparison to Asian currencies. The peso gained 5.64 percent in 2020, making it one of the two strongest Asian currencies, ending the year at PHP48.036/US$1.

As of the end of the first semester of 2021, the local currency had weakened vis-à-vis the dollar, as had other currencies in the region. Year to date, the peso has depreciated by 1.05 percent against the US dollar, making it one of the four strongest performers among 11 Asian currencies.

As of the end of the first semester of 2021, the local currency had weakened vis-à-vis the dollar, as had other currencies in the region. Year to date, the peso has depreciated by 1.05 percent against the US dollar, making it one of the four strongest performers among 11 Asian currencies.

In 2019, the peso was the least volatile currency among Asian countries with data available. Because of the pandemic, the volatility of many currencies increased in 2020, but the peso remained one of the more stable currencies, ranking second only to the Thai baht.

The volatility of the peso-dollar exchange rate, as measured by the coefficient of variation (CV), increased from 0.74 in 2019 to 0.92 in 2020, mirroring the trend in Asian currencies. For the month of June, the peso-dollar CV increased to 0.94 from 0.82 in May. This increase in volatility can be attributed to the Fed’s announcement that it will begin “talking about talking” about tapering, or reducing its purchases of government bonds and mortgage-backed securities.

The peso’s relative stability is supported by strong fundamentals. For example, as of the end of May, the country’s reserves of US$107.25 billion could cover more than a year’s worth of imports. Furthermore, the country’s external debt exposure, measured as a percentage of GDP, is the lowest among major Southeast Asian economies. Prudent macroeconomic management, containing the virus’s spread and ramping up the vaccination program, and safely reopening the economy will be critical in restoring investor confidence in the country during this pandemic.

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