x Abu Dhabi, UAEMonday 24 July 2017

Philippine peso hits 6-month low as remittance growth slows

The Philippine peso slid to its weakest in nearly six months as growth in remittance inflows hit a five-month low and offshore funds sold the currency, despite a rebound in other emerging Asian currencies.

The Philippine peso slid to its weakest in nearly six months as growth in remittance inflows hit a five-month low and offshore funds sold the currency, despite a rebound in other emerging Asian currencies.

The peso's slide accelerated as a break of a long-term chart support triggered stop-loss selling, traders said.

The Philippine currency lost as much as 0.5 per cent to 41.430 pesos per dollar, its weakest since October 22, according to Thomson Reuters data.

Investors suffered from stop-loss selling after the peso started the day weaker than its 200-day moving average, currently at 41.296 per dollar, traders said. The peso had been firmer than the average since June last year.

It recovered some of its initial losses to close at 41.380 per dollar, compared with Monday's close of 41.235 per dollar, but still underperformed most of its Asian peers, which turned higher on Tuesday.

"Sentiment still remains fragile," said a senior Philippine bank trader in Manila, adding the peso may head to 41.850 per dollar in the medium term.

That is near the 38.2 per cent Fibonacci retracement of its appreciation between May 2012 and March this year.

The peso's weakness came as growth in remittances from overseas Filipino workers, a main driver supporting the peso, has been slowing.

In February, remittances rose 6.0 per cent from a year earlier, the lowest growth pace in five months, central bank data showed on Monday.

"The (dollar/peso's) upward bias remains intact and a closing above 41.35 should confirm this uptrend. Major resistance is expected at 42.40," said Maybank in a note.

Early this year, the Philippine currency enjoyed inflows stocks and bonds on stronger economic fundamentals and hope for a ratings upgrade. On March 14, the peso was at its strong point this year, 40.550 per dollar.

On March 27, the upgrade came, as Fitch Ratings raised the country to an investment grade.

But then investors took profits. Since the upgrade, the Philippine unit has lost 1.4 per cent.

The peso, the second-best performer in emerging Asia in 2012 with a 6.8 per cent gain to the dollar, has lost 0.8 per cent this year, according to Thomson Reuters data.

But now, some traders and analysts said the currency has been excessively sold with the 14-day dollar/peso relative strength index at 68.1, around the 70-threshold.

An index above 70 indicates the pair is seen as overbought.

The pair has been around the threshold since late March.

 

* Reuters