Peso closes higher at 55.37 to $1, ends 2-year slump

MANILA, Philippines — After slumping for two straight years, the peso appreciated slightly against the dollar this year as the Bangko Sentral ng Pilipinas (BSP), like other global central banks, gained some headway in its fight against elevated inflation.

The peso gained 38.5 centavos to close the year at 55.37, from 55.755 to $1 in 2022.

Prior to this year, the peso depreciated for two consecutive years, to 50.999 in 2021 and further to 55.755 in 2022 from 48.023 in 2020.

After falling to a record low of 59 to $1 in October 2022, the local currency bounced back strongly to the 53 to $1 handle in February, but weakened back and almost touched the 57 to $1 level in September and October due to the aggressive rate hikes delivered by the US Federal Reserve.

For 2023, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the peso emerged as one of the best performing currencies in Asia after appreciating by 0.7 percent against the dollar.

At yesterday’s trading, which is the last trading day for the year, the peso appreciated by 11 centavos from 55.48 last Thursday. It opened stronger at 55.46 and slipped to an intra-day low of 55.5, gaining traction to hit an intra-day high of 55.34.

Ricafort said the healthy downward correction of the dollar-peso exchange rate over the past three weeks remains intact for as long as it remains below the 55.70 to 55.80 level in the near future.

He said the immediate major support of 55.30 could potentially retest the 55 psychological market and then the immediate low of 54.30 posted on July 17.

Just like last year when it actively intervened in the foreign exchange market, the BSP again dipped into the country’s gross international reserves (GIR) to smoothen the volatility this year.

China Bank chief economist Domini Velasquez said the peso may further strengthen against the greenback next year as the US Fed prepares to cut rates after an aggressive tightening cycle.

“Looking ahead to next year, we expect the peso-dollar exchange rate to range between 53 and 56, with most of the appreciation expected to occur in the second half of the year,” Velasquez said.

She pointed out that financial markets are even more bullish anticipating the first rate cut as early as March 2024.

According to Velasquez, a possible game changer in 2024 is if the Bank of Japan hikes its policy rate, which could drive the dollar lower.

“These global developments are likely to provide support to emerging markets’ currencies, including the Philippine peso,” she added.