Peso drops to 50.30 vs US dollar: Will it keep sliding?

SLIDING: The Philippine peso dropped further alongside local equities market on July 13, 2021, after Fitch Ratings revised its outlook on the country’s economy to negative from stable — reflecting negative sentiment amid rising risks from the pandemic on the Asian country, a trend seen since June 2021.

DROP IN VALUE: On July 13, the peso dropped as much as 0.4% to 50.30 per dollar, its weakest since June 2020. The Philippine Stock Exchange Index, meanwhile, dropped 1.27% (All Shares), while the PSEI composite index slid by 1.72%. Photo shows Ayala Land's Tower 1, home of one of the two trading floors of the Philippine Stock Exchange in Manila (the other being at Tektike Tower in Ortigas Centre).

MARKET REACTION: The spread on Philippines’ 2032 dollar bond over Treasuries rose about five basis points to 75.1 basis points. Analysts see a knee-jerk reaction in the market, as investors look closely at upcoming economic data, corporate earnings in the near-term to kick up sentiment. | An aerial view of the Luneta Park in Manila.

SENTIMENT: Analysts say that country needs to do better in key economic indicators as well as the pace of vaccinations for the exchange rate and market sentiment to go bullish again. In June, the country ranked 52nd out of 53 countries in terms of pandemic response, according to Bloomberg’s coronavirus disease 2019 (COVID-19) resilience ranking, where the government scored poorly in vaccine rollout, among other things.

AMONG THE LOWEST IN RESILIENCE: The Philippines, India and some Latin American countries ranked lowest “amid a perfect storm of variant-driven outbreaks, slow vaccination and global isolation,” according to a Bloomberg report. Health workers prepare vaccines against COVID-19 at a mobile vaccination facility in Manila.

PANDEMIC EFFECTS, SLOW VACCINATIONS: Since the pandemic began about 18 months ago, the Philippines has struggled to get a handle on the coronavirus. Severe movement restrictions, now largely proven ineffective, a fragmented healthcare system and slow vaccination rollout, have hammered the consumption-driven economy while failing to contain the virus. Photo shows a health worker injecting China's Sinovac vaccine on a colleague. Dr Gao Fu, the head of the China's CDC, said in April 2021 that they are looking at ways to overcome relatively low efficacy rates of Chinese vaccines, and are mixing Covid-19 vaccines to offer more protection.

REASON FOR PESO'S SLIDE: The Philippine currency started retreating in June 2021, after several months of appreciation. It slid to P49:$1 level on July 1, on local manufacturing data as well as coronavirus concerns.  | Photo shows an electronic manufacturing facility in the Philippines.

FATF MONITORING: The peso’s slide also came after the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, announced that the Philippines will be under increased monitoring to prove its effective implementation of anti-money laundering (AML) and counter-terrorism (CTF) financing measures. FATF is an inter-governmental policymaking body whose purpose is to establish international standards, and to develop and promote policies, both at national and international levels, to combat money laundering and the financing of terrorism. Photo shows a customer paying for purchases using e-cash.

BSP ACTION: The Philippine central bank, BSP, pledged at its June meeting to keep monetary policy loose "as long as necessary”. The country’s central monetary authority stated that it doesn’t see GDP returning to pre-crisis levels until the third quarter of 2022. The World Bank in June 2021 cut its GDP outlook for this year to 4.7%, from 5.5%. Photo shows Philippine central bank governor Benjamin Diokno.

MONEY LAUNDERING CASE: In February 2016, Bangladesh’s central bank found $81,001,662.12 missing from its account with the Federal Reserve Bank of New York. The stolen funds found their way into a major Philippine bank, converted into pesos by remittance companies, and disappeared in Manila’s smoky casinos.

WHAT HAPPENED NEXT: Five years later, Philippine media reported that only $15 million has been recovered. Only one person, Maia Deguito, the manager of the Jupiter Street, Makati branch of Rizal Commercial Banking Corp. (RCBC), has been convicted.