In recent days, the Philippine peso has done what other Asian currencies were unable to, and that’s to make gains against the US dollar in an environment of heightened geopolitical risk – an environment normally associated with a sell-off in emerging market currencies.
The peso gained again on Monday following up on its superb performance on Friday, in which PHP/USD posted its biggest gain in almost a year. The pair now trades at 0.02017 (USD/PHP 49.57), which puts it at two-month highs and marks a two-day gain of 1.23%.
In comparison, the Singapore dollar, Taiwan dollar, Korean won and Chinese yuan are all comfortably down in recent days against the US dollar. Even the Indian rupee, which has been soaring since late-January, fell against the US currency yesterday. The Japanese yen, which has benefitted from a flight to safety following US air strikes on Syria and elevated political risk in Europe, has been flat against USD.
Peso Supported as Foreign Investors Pile into Philippine Stocks
In late-January, ratings agency Fitch affirmed its investment grade status for the Philippines – a move which preceded a near 300-point rally in the country’s PSEI equity index.
According to Bloomberg, global funds purchased a net USD 166.9 million worth of Philippine shares last week – the biggest inflow of foreign capital since May. And of course, in order for funds to buy these shares, they must first convert money into (buy) pesos. This conversion seems to be the key driver of current peso appreciation.
Recent peso strength has come in spite of a worsening trade gap. Early on Tuesday, the Philippine Statistics Authority announced a trade deficit in February of USD 1.73 billion, compared with USD 1.1 billion a year ago.
Philippine Holidays Still a Bargain!
None of what has been said above masks the fact that the Philippine peso remains a bargain, having fallen more than 18% against the US dollar since highs established in early 2013. At an exchange rate of 0.02017, PHP/USD trades now at 2008 levels.
Holiday makers might now consider the Philippines as a place to top up that (fake) tan. Consider that a standard (aka ‘Deluxe’) room in a 4-star hotel in beautiful Boracay might set you back PHP 5000 per night, which is now only USD 100. In 2013, the same room at the same rate would have cost as much as USD 123. Across an entire holiday’s budget, the potential for significant savings (or upgrades) is obvious.
BestExchangeRates readers travelling to the Philippines need no longer suffer the obscene margins at the airport’s Bureau de Change. You can easily compare the cheapest providers of PHP foreign currency using our online comparison tool here.
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