Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. assured Tuesday that monetary authorities are ready to prevent the excessive volatility of the peso, which has been hovering beyond the 53-per-dollar level since the middle of the month.
In a presentation on June 19 before Japanese businessmen during the Philippine Economic Briefing held in Tokyo, Espenilla said the movement of the local currency was market-driven and its medium-term stability was well supported by sound macroeconomic fundamentals.
“[The] peso exchange rate flexibility promotes self-correcting mechanisms, helps maintain price competitiveness, and prevents the build-up of unsustainable imbalances which in turn should help keep the balance of payments and the monetary system under control,” he said.
“Nevertheless, the BSP is ready to act to prevent excessive peso volatility and overshooting due to speculative activities,” Espenilla said.
Espenilla is among the Philippine government’s delegation visiting Tokyo this week. He will discuss the country’s economic and financial landscape from a central bank perspective during the economic briefing.
The peso on June 13, 2018 breached the 53-per-dollar boundary and closed at 53.23, pulled down by financial markets’ anticipation the US Federal Reserve was likely to raise interest rates two more times this year. The Fed decision boosted the dollar against most currencies, including the peso.
The peso on Tuesday slightly recovered and closed P0.04 stronger at 53.44 from the new 12-year low of 53.48 per dollar on Monday, its weakest level in almost 12 years since the 53.55 on June 29, 2006.
Philip Wee, foreign exchange strategist of DBS Group Research, said in a report that Asian currencies were facing depreciation pressures due to monetary policy divergences that have supported the US dollar globally.
“The Fed has affirmed that it will be moving to deliver a total of four, not three, rate hikes this year. The European Central Bank has confirmed that asset purchases will end in December which forced markets to reverse earlier bets for the central bank to bring forward its rate hike into 2019,” Wee said. Julito G. Rada