The Story of the Peso: How The Peso Seems to Stay Immune to the Coronavirus Pandemic

  • 27
    Apr 2020

    The Story of the Peso: How The Peso Seems to Stay Immune to the Coronavirus Pandemic

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    While a number of economies were badly hit by the Coronavirus pandemic and are still continuously being blasted, curiously enough the Philippines has been in a steady state against all other currencies. In our past articles, we talked about how the overall outlook of the Philippine Stock Exchange was still optimistic after it crash and that investor confidence in the Philippine economy reached a high level due to the country’s monetary policies.

    Another interesting aspect to look at is the currency of the Philippines– the Philippine Peso or the PHP. Recent news has been telling us that the PHP has been keeping its ground against the US Dollar even though a lot of other ASEAN currencies (or Asian currencies for that matter) have been hit.

    Why is that so?

    That’s what we’re going to discuss here in this article– how well the PHP is doing and why.

     

    The Current Status of the PHP

    First, let’s discuss where the PHP is in terms of ranking. According to BSP Governor Benjamin Diokno, the Peso is currently at the ranking of second strongest currency with Japan being the first. This came from the monitoring of 14 Asian currency strengths after the pandemic.

    To be specific, the peso closed at P50.825 to the USD last April 24.

     

    Main Reasons for Its Strength

    So far, the strong fundamentals of the country has kept it economically afloat. The trade inflows of exports and external investments helped boost the economy, keeping the PHP steady.

    However, one of the main reasons as to why the PHP is still pretty strong is its high GIR, according to Diokno. The GIR refers to Gross International Reserves which are the reserve foreign currencies that the country has put aside. In fact, Diokno plans to raise the GIR to $90 billion by the end of the year.

     

    What’s In Store for the Peso?

    What’s going to happen next?

    Well, even though the PHP has remained on its ground for the past few weeks, there have been a lot of events that have hit global markets. Obviously, these global events will also hit the Philippines.

    For instance, the PHP is expected to weaken a bit due to the huge dip in oil prices. According to Chief Economist Ruben Asuncion, another reason why the PHP may fall is due to the extension of the lockdown. However, this is actually expected because this means that a lot of economic sectors still won’t move.

    We can also see the effects of the extension in the stock market. Several stocks dipped a bit when the announcement was made.

     

    What Does This All Mean?

    Simply put, expect there to be a lot of volatility with the currency due to all the external events that can affect the currency. However, both Diokno and Asuncion have very optimistic views on the PHP. They both expect it to remain strong even throughout the lockdown.

    One of the main advantages of knowing how to trade in the Forex market is also being able to analyze your own country’s economic performance and currency strength. This will give you an indication as to whether your home country is able to respond properly during economic turbulence such as now.

    If you want to learn more about fundamental analysis and currency exchange trading, click on the “Register Now” button below to book a free live online seminar with us.

     

     

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