Peso’s Losing Streak Sends It Toward Two-Year Low

(Bloomberg) -- The Philippine peso has fallen for three straight quarters and hit a 17-month low last week. The bad news doesn’t end there.

Technicals suggest the currency could test its 2019 trough by year-end, with a dovish central bank adding to the pressure. Falling real yields, equity outflows and high oil prices also conspire against the peso.

The Philippine currency has unwound all of last year’s gains as surging virus infections and a stronger greenback take a toll. The peso underperformed most of its Asian peers last quarter but the authorities are likely to embrace the weakness given the boost it will deliver to exports.

The peso dropped more than 4% last quarter and has bearishly breached support at 50.67, its August low. It could approach 51.81, the 61.8% Fibonacci retracement of its October 2018 to June 2021 advance against the dollar.

If it falls below that level, it may head toward 52.81 this quarter, the 76.4% retracement of the Fibonacci move which is near its 2019 low of 53.04.

“USD/PHP at 51.00 signals the dollar bulls are well in control,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc in Manila. “Should this bullish dollar momentum persist, it could try the 51.50 levels in the near-term.” 

Real Yields

The peso already has the central bank’s implicit nod to drop further. The expectations of businesses and consumers for the currency to depreciate against the dollar are in line with policy makers’ views, Bangko Sentral ng Pilipinas Senior Assistant Governor Iluminada Sicat said last month.

September inflation data due Tuesday may add fuel to the fire. Consumer-price growth likely accelerated to a range of 4.8% to 5.6% during the month, driven by higher costs of oil, electricity and other basic goods, central bank Governor Benjamin Diokno said.

Prices climbed 4.9% in August from a year earlier, the fastest pace since 2018, and a Bloomberg survey of economists forecasts a 5.1% gain in September. The quickening pressures are likely to erode the nation’s real yields. 

Finally, a recent rally in energy prices is also weighing on the currency as the Philippines is a net oil importer. Outflows are an added source of pressure, with global funds withdrawing almost $200 million from local equities last quarter.

Here are the key Asian economic data due this week:

• Monday, Oct. 4: Singapore PMI
• Tuesday, Oct. 5: RBA rate decision and Australia trade balance, Philippine CPI, Japan services PMI, Singapore retail sales, Thailand CPI
• Wednesday, Oct. 6: RBNZ rate decision, Taiwan CPI, South Korea CPI
• Thursday, Oct. 7: South Korea BoP current account balance
• Friday, Oct. 8: RBI rate decision, China Caixin services PMI, RBA financial stability review, Japan household spending, labor cash earnings and BoP current account balance, Taiwan trade balance

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