The Shift Of The Philippine Peso Regime

In the Aquino era, the focus was on financial flows, which rested on a strong peso. In the Duterte era, it is on the huge investment drive, which can live with a weaker currency. The peso’s political economy is shifting.

Recently, international media have released contradictory peso reports. But the phenomenon is not new. For instance, Bloomberg’s Ditas Lopez first attributed the peso’s decline to Duterte two months before the actual election (April 27, 2016). Yet, after the election, the peso rose for weeks beating forecasts so that by late August 2016 even Bloomberg had to admit that the currency had completed the “best performance in Asia this month.”

That performance was mainly the net effect of a Duterte reassessment by the markets. Most media had vilified him as a threat (social media was a different story). But as Duterte launched his infrastructure agenda, observers realized that the country was not facing a “populist threat,” but a huge investment drive.

Yet, historically, infrastructure drives favor weaker currencies; a fact that got lost in the translation. Instead, much of the media, including Lopez, continued to lament that “Duterte’s peso rout runs counter to the booming Philippine economy” (September 29, 2016). The assumption was that a thriving economy must go hand in hand with a strong peso and that if this is not the case, then the economy cannot really be booming.

Perhaps that’s why Bloomberg later declared that “Asia’s ugly duckling of the year Is the Philippine peso” (March 2, 2017). Unfortunately, the facts told a different story: the peso erased the year’s loss as funds snapped up local stocks only a month later. That did not convince Lopez who now reported that peso is seen as “Asia’s worst performing currency next year” (December 22, 2017). Once again, peso was seen amid another “rout” (June 20, 2018).

The same story prevailed in early 2019 when Bloomberg reported that “peso faces new threat as Duterte gears up for poll” (January 7, 2019). With U.S. dollar at 53 peso, Lopez saw the peso among Asia’s biggest losers this year. Yet, it was followed by a very different piece, which was not authored by Lopez, but David Finnerty, Bloomberg’s foreign-exchange strategist who reported that “peso surprises to become Asia’s best currency” (March 3, 2019). By then, the peso had strengthened to 52. Yet, only hours later, Lopez, together with Siefrid Alegado, reported that “peso slumps as the Philippines makes surprise Central Bank pick” (March 4, 2019). In this view, peso had plunged “most since 2013,” although the exchange-rate was 52.20.

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Disclaimer: Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute ...

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