MANILA, Philippines – The peso recovered yesterday from its 11-month slump against the dollar as investors cheered the better-than-expected first quarter economic growth rate.
The local unit closed 42.32 against the dollar, 12 centavos stronger than the previous day’s 42.44, which was the weakest since June 2012.
Dollars traded reached $1.112 billion, up from Wednesday’s $1.057 billion.
“Basically, the strength was due to local story of a strong GDP (gross domestic product) growth that was well above market expectations,” a trader at a local bank said in a phone interview.
Driven by consumption and investments, the economy grew by a surprising 7.8 percent for the first three months, the fastest in three years, and beating market consensus of just about six percent.
The result was also well-above the official six to seven-percent growth goal for the year.
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Emilio Neri Jr., an economist at the Bank of the Philippine Islands, said investors would likely continue purchasing the peso, thereby boosting its strength versus the US dollar, “in the near-term.”
“The Philippine peso may see some appreciation pressure in the near-term after its sharp slide in the past week as dealers were likely surprised by the strong GDP print,” Neri said in a research note.
The peso, Asia’s second best performer last year, has lost more than three percent since the end of last year. This was the second straight day it traded at 42-level versus the greenback this year.
While good news locally drove peso’s appreciation, the bank trader noted it was “contained” due to continued concerns in the US where stimulus measures are seen to end soon. Investors, he said, are projecting “good” US growth data and jobless claims due last night for release, and thus taking them as sign that the US Federal Reserve will decide to stop purchasing $85 billion in securities every month.
“As long as there is good data coming out, we may continue to experience weak sentiment in local assets,” Neri explained.
“External sentiment may weigh a bit more in the (second quarter)…as the US dollar appears to be poised for further strengthening across most other currencies,” Neri said.