Last week, Goldman Sachs issued a report noting that the rising coronavirus or COVID-19 cases in the Philippines have made it turn “bearish” on the Philippine peso. The international investment banking giant cited that the Philippines’ official currency weakened against the US dollar by approximately 7 percent between June and mid-August 2021.
Goldman Sachs cited that this scenario made the Philippine peso the second worst-performing currency in Asia, excluding Japan, and next to the Thai baht in the past two to three months. We find this foreign exchange-related news worth sharing with our readers.
We think this report exhibits the adverse impact of the COVID-19 pandemic on the world’s currencies, and our readers can stay guided by reading it. According to the August 23, 2021 report posted online by Philippine news source Inquirer, Goldman Sachs referred to the sharp surge in new COVID-19 infections in the Philippines from 8,000 to roughly 13,000 daily this month.
Last Friday, August 20, new coronavirus cases in the Southeast Asian country hit a record-high of 17,231. Goldman Sachs also mentioned that the Philippines’ vaccination rate remains relatively low at 13 percent of the populace.
The investment banking group remarked that it would expect the Philippine peso to resume its good performance against its non-Japan Asian peers when the COVID-19 cases decrease, the economy reopens, and mobility restrictions get relaxed.
Last year, Goldman Sachs observed that the foreign exchange market, including corporations, inter-bank players, and offshore funds, had been mostly favoring the Philippine peso against the US dollar.
Furthermore, the Philippines’ official currency was recognized as among the best-performing currencies in the Southeast Asian region during that time. Goldman Sachs cited that import spending dwindled in the Philippines in 2020, in line with the sluggish economic activities during the pandemic.
The bank also noted that the Philippine government’s offshore borrowings boosted foreign inflows. Nevertheless, the US Federal Reserve System’s signal that it would unwind its monetary stimulus earlier than anticipated reinvigorated the greenback.
The Fed’s sign meant US interest rates are bound to increase. We agree with Goldman Sachs when it comes to the Philippine peso. We also believe that the ongoing coronavirus pandemic has negatively affected the Philippine official currency’s performance.
We feel pleased that 2020 was the time when the Philippine peso overperformed in the Southeast Asian region. That time was when the strictest lockdowns got imposed in the Philippines, and there was slashed demand for imported raw materials and capital goods paid in US dollars.
We think Filipinos should just stay calm, despite the Philippine peso’s purchasing power sinking due to the strong greenback and the coronavirus pandemic. We believe that the country’s central bank, the Bangko Sentral ng Pilipinas and the national and local government units are doing their important part in helping the people manage financially amid the weak Philippine peso and the COVID-19 crisis.