Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said Tuesday he is not alarmed by the depreciation of the peso against the US dollar, saying its weakness is “not unusual.”
“It’s actually just reflecting market conditions and underlying fundamentals. We’ve seen nothing particularly unusual about this. It’s the nature of the exchange rate to fluctuate,” Espenilla said.
“As far as the BSP is concerned, we’re managing excessive volatility,” Espenilla said.
He said the approach of Bangko Sentral remained to let the exchange rate reflect underlying market conditions.
“What we look at isn’t much the exchange rate but the underlying conditions. Today, the underlying conditions are quite healthy, as a result prices reflect those condition… Our focus is keeping inflation low and banking system strong. These are still existing today,” Espenilla said.
He said volatility continued to exist because of policy uncertainties and political tensions and it was “very difficult to say what’s affecting it on a daily basis.”
The peso recovered slightly on Tuesday to close at 50.53 against the dollar, after hitting a 10-year low of nearly 50.7 against the greenback Monday.
University of Asia & the Pacific economist Victor Abola last week said the weakness of the peso could be traced to the expected stronger imports.
The Philippines posted a record trade deficit of $2.8 billion in May and $11 billion in the first five months, as imports growth continued to outpace those of exports.
Business Monitor International, a unit of Fitch Group, said the peso might close the year at 50.50 a dollar, because of the fragile political outlook in the Philippines and the expected additional rate hikes by the US Federal Reserve.
BMI considered the peso one of the worst-performing currencies in Asia this year, after it broke support at 50 a dollar. The peso closed at 49.72 a dollar on the last trading day of 2016. The peso’s all-time low was at 56.39 in October 2004.