PHP: PHP Still Lagging SEA FX, But Trade Deficit May Improve

USD/PHP is holding in the 56.50/55 region in latest dealings. This is a modest 0.10% weaker in PHP terms, but follows Monday's 1% PHP loss. Recent lows in the pair come in just under 56.00. The 20-day EMA isn't too far away, last near 56.70. For today's session, PHP is underperforming other South East Asian (SEA) currencies, with MYR and THB both up around 0.30%, while IDR is up a little over 0.15% at this stage. 

• Earlier data showed better than expected export growth (close to flat against a market projection of -3.2% y/y). Imports were stronger than forecast at 7.% y/y, a positive sign for domestic demand, but also seeing a wider trade deficit near -$4.9bn (forecasts were at -$4.2bn). This is the widest deficit since March 2023, albeit marginally. This likely remains somewhat of a drag on relative PHP performance, off 2% YTD and comfortably the weakest performer in SEA FX.
• The data calendar is quiet now until next week's remittance figures. In the cross asset space, local equities are surging higher, although offshore inflows remain fairly modest in September to date (+$40.5mn).
• This, coupled with lower commodity prices, which should improve the trade balance going forward all else equal, may help limit USD/PHP upside. The chart below plots the Citi PHP terms of trade proxy against the Philippines trade position. 

Fig 1: Philippines Trade Balance Versus Citi PHP Terms of Trade Proxy