As foreign portfolio investment funds ("hot money") continue to pour into the Philippines, the Philippine Peso has been steadily rising against the US Dollar for several consecutive days, reaching a 3-year high on the 26th.
On that day, the Philippine Peso reached an intraday high of 42.210 pesos to 1 US dollar and a low of 42.435 pesos to 1 US dollar in the local Manila foreign exchange market. It closed at 42.225 pesos to 1 US dollar, a significant increase of 0.165 pesos from the closing rate of 42.39 pesos to 1 US dollar on the 25th, with total daily trading volume surging to 1.103 billion US dollars. This is the highest level for the Philippine Peso against the US Dollar since May 2008. Data shows that on April 30, 2008, the Philippine Peso once reached 42.17 pesos to 1 US dollar.
Economists analyze that the continuous appreciation of the Philippine Peso is due to investors being more optimistic about the economic growth prospects of the Philippines compared to Western countries, leading to an influx of more hot money. At the same time, emerging economies like the Philippines have continuously raised interest rates to curb inflation, while Western countries led by the United States have had to maintain low interest rates to stimulate economic growth. Diwa Guinigundo, Deputy Governor of the Bangko Sentral ng Pilipinas, pointed out at a forum on the 26th that the disparity in growth rates and interest levels between emerging Asian economies and Western nations will continue to drive more foreign portfolio capital into emerging Asian economies.
Official Philippine forecasts suggest that the country's economic growth rate could reach 5% to 6% in 2011, and the Bangko Sentral ng Pilipinas has already raised benchmark interest rates twice this year. The latest data from the central bank shows that as of July 8, the total inflow of foreign portfolio investment exceeded 9.5 billion US dollars, an increase of approximately 100% compared to the same period last year. Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. recently emphasized that the central bank will closely monitor hot money inflows and is prepared with countermeasures to ensure that these inflows do not push domestic inflation beyond policy targets.
