The peso closed higher yesterday, gaining 65 centavos from Monday’s new all-time low of 59 to the US dollar, after the Bangko Sentral ng Pilipinas (BSP) issued a plea to those “who have the means not to take undue advantage of changing market conditions.”
The local currency opened higher at 58.88 then reached a low of 58.98.
Trading volume was bigger at $779.1 million from the previous day’s close of $666.7 million.
BSP said it is “committed to enhancing the well-being of Filipinos through a financial system that addresses the funding needs of the public while managing risks.”
“We ask those who have the means not to take undue advantage of changing market conditions. This does not help the Philippine peso; it does not help the Philippines. What we can do is to bring all transactions into an organized and accessible formal market that offers consumer protection,” BSP added.
BSP stressed that market conditions around the world are challenging.
“Working together allows us to sustain our functioning financial market while appropriately managing the developing risks,” BSP said, adding there are many reasons why financial markets worldwide have been experiencing notable changes thus far in 2022.
“Among the pronounced developments is a strong US Dollar which is causing currencies like the Philippine Peso to depreciate. The BSP is taking steps to manage any disruption in our financial market. We look forward to servicing all legitimate dollar transactions,” it said.
“The USD spot market remains open and active while forwards and repos are available facilities. All of these can move the economy forward by supporting the financial leg underpinning economic activity and allowing for an orderly settlement of USD obligations. This puts the Filipino in a better position,” BSP added.
Economists’ reactions were mixed.
“BSP recognizes the importance of legitimate transactions for commerce as this will spur economic growth. What they are hoping to minimize and mitigate are speculative moves which tend to drive undue pressure and panic on the spot market,” said Nicholas Mapa, ING Bank senior economist.
An economist said BSP is “possibly just making sure depreciation is in check and that there are no speculative activities.”
Since the start of 2022, the peso has depreciated by a total P7.65 or 15 percent compared to end-2021’s close of 50.99.
Michael Ricafort, RCBC chief economist, said the depreciation “could still lead to higher prices of imports and overall inflation, thereby would increase possibility of further local policy rate hikes even a surprise local policy rate hike to help stabilize the peso as well as overall inflation.”
“More intervention in the local foreign exchange market; measures to further siphon off more pesos from the financial system to reduce the pesos used to purchase US dollar; greater monitoring of foreign exchange transactions; among other measures to support the peso, could be used in the policy toolkit, all of which could help stabilize the peso exchange rate, as well as overall inflation,” Ricafort said.
Domini Velasquez, China Bank chief economist, said the slight appreciation of the peso “is likely in anticipation of the new 3-year bond.”
“However, this gain is likely wobbly given expectation of higher inflation in September and also continued widening of the trade deficit, both data for the Philippines will be released this week. In case we see better-than-expected figures, the peso will likely keep at the current level and not push to 60 levels in the coming days,” Velasquez said.
Ricafort said yesterday’s trading “nearly erased Monday’s rise of P0.375 centavos.”
“(Peso gained) after the recent tighter reportorial requirements on forex transactions and the slower-than-expected ISM Manufacturing data to the lowest in more than 2 years led to the healthy downward correction in US Treasury yields and in the US dollar against major global currencies to new 1-week lows,” he said.
For today, Ricafort said the peso exchange rate could range between 58.80 and 59 levels.
