Currencies 3 MIN READ

Peso strengthens versus dollar as Nov. budget deficit narrows

December 22, 2022By BusinessWorld

THE PESO strengthened slightly on Thursday due to the narrowing of the government’s budget deficit for November.

The local currency closed at PHP 55.09 against the greenback, up by a centavo from Wednesday’s PHP 55.10 close, data from the Bankers Association of the Philippines showed.

The peso opened the session at PHP 55.045 per dollar, which is also its intraday best. Its weakest showing was at PHP 55.18. Dollars traded fell to USD 774.2 million from USD 833.7 million on Wednesday.

In a Viber message, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso inched up mainly because of the recent data release from the Department of Finance on the country’s budget deficit.

Data sent by Finance Secretary Benjamin E. Diokno to reporters on Wednesday showed that the fiscal gap in November shrank by 3.7% year on year to PHP 123.9 billion from PHP 128.7 billion.

Year to date, the budget deficit shrank by 7.2% to PHP 1.24 trillion, from the PHP 1.33-trillion gap in the same period last year.

Mr. Diokno said this was 75% of the revised PHP 1.7-trillion full-year deficit program.

The data also showed that the narrowing of the deficit was due to revenue growth outpacing state spending.

Revenue collections for November jumped by 16.57% year on year to PHP 331.1 billion from PHP 284.4 billion.

Meanwhile, tax revenues increased by 15.92% year on year to PHP 312.9 billion. The Bureau of Internal Revenue collected PHP 237.1 billion, up by 12.53% year on year, while the Bureau of Customs saw its collections rise by 30.74% to P75.7 billion. There were no revenues reported from other tax offices.

Additionally, nontax revenues went up by 28.96% to P18.2 billion in November. The Bureau of the Treasury reported a 13.25% drop in revenues to PHP 5.3 billion. Other offices saw a 61.04% increase in revenues to PHP 12.9 billion.

However, data also showed that state spending rose by 10.24% to PHP 455 billion from PHP 412.7 billion a year ago.

Mr. Ricafort said that the peso gained on the upward correction of the US stock market.

According to a report by Reuters, the US market’s three main stock indexes closed higher on Wednesday for their biggest daily gains so far in December with help from upbeat Nike and FedEx quarterly earnings, as well as improving consumer confidence and easing inflation expectations from investors.

The Dow Jones Industrial Average rose 526.74 points or 1.6% to 33,376.48; the S&P 500 gained 56.82 points or 1.49% to 3,878.44; and the Nasdaq Composite added 162.26 points or 1.54% to 10,709.37.

Meanwhile, a trader said in an e-mail that the peso strengthened due to the continued increase in foreign exchange inflows.

“The peso strengthened anew amid increased peso demand due to expected year-end foreign remittances,” the trader said.

The trader also noted that Friday’s movement could be affected by the release of key US economic data.

“The local currency might appreciate tomorrow (Friday) ahead of potentially weaker US personal consumption expenditure inflation which serves as the Fed’s main inflation gauge,” the trader said.

Mr. Ricafort sees the peso moving between PHP 55.00 to PHP 55.20 while the trader gave a slightly wider forecast range of PHP 54.95 to PHP 55.20. — Aaron Michael C. Sy


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