MANILA - The Philippine peso's 1.2 percent drop on Thursday was a knee-jerk reaction to an emerging markets sell-off this week, but the currency should regain strength backed by the country's strong fundamentals and healthy external accounts, a senior central bank official said.
The Philippine peso closed at 44.170 on Thursday.
Local markets were closed for three days due to heavy monsoon rains that flooded the capital Manila and a public holiday on Wednesday, as speculation over the timing of when the Federal Reserve would begin to taper monetary stimulus gripped global markets.
"We have BOP and current account surpluses, that should drive the firmness of the peso moving forward, and that should also contribute to sustaining low and stable inflation," Diwa Guinigundo, deputy central bank governor, told reporters.
He added that the peso's weakness was unlikely to persist in the long term.
BOP surplus at 6 month high
The country posted a balance of payments surplus of $3.677 billion in January to July, central bank data show. The central bank has forecast a full-year BOP surplus of $4.4 billion.
Cash remittances, which help power domestic consumption, grew 5.8 percent in June to $1.92 billion from $1.81 billion a year earlier. Remittances in the first half of the year reached to $10.7 billion, up 5.6 percent from last year.
The central bank expects cash remittances to grow 5 percent this year from $21.39 billion in 2012. The Philippines posted net portfolio inflows of $895 million in July, after two consecutive months of outflows.
The central bank attributed the turnaround to the U.S. Federal Reserve's decision to maintain its quantitative easing programme until the recovery in the world's largest economy is sustained.