The volatility of the peso-dollar exchange rate rose in June versus the previous month, the Department of Finance (DOF) said, amid possibility of the Federal Reserve’s taper talk.
The DOF said in its economic bulletin over the weekend that for the month of June, the volatility of the peso-dollar exchange rate, as estimated by the coefficient of variation, rose to 0.94 from the 0.82 registered in May.
“This increase in volatility may be traced to the Fed’s (US Federal Reserves) indication to start talking about a taper, that is, reducing its purchase of government bonds and mortgage-backed securities,” the DOF said.
The DOF added like other currencies in the region, the local currency weakened vis-í -vis the dollar as of the end of the first semester of 2021.
Year-to-date, the peso depreciated by 1.05 percent against the dollar, one of the four strongest among 11 Asian currencies.
Still, the DOF said strong fundamentals support the relative stability of the peso.
“As of end-May, for instance, the country’s reserves of $107.25 billion could cover more than a year’s worth of imports. Furthermore, the country’s exposure to external debt, measured in percent to gross domestic product, is the lowest among major Southeast Asian economies,” the DOF said.
“Prudent macroeconomic management, containing the spread of the virus and ramping up the vaccination program and safely reopening the economy will be important in maintaining investor confidence in the country during this time of pandemic,” it added.
The DOF said amid the onslaught of the coronavirus pandemic, the peso has remained relatively stable compared with Asian currencies.
The peso appreciated by 5.64 percent in 2020, among the two strongest Asian currencies, ending the year at 48.036 to a dollar.
“The volatility of many currencies increased in 2020 due to the pandemic but the peso remained among the more stable currencies, ranking next to the Thai baht,” the DOF said.
The volatility of the peso-dollar exchange rate rose from 0.74 in 2019 to 0.92 in 2020, tracking the trend in Asian currencies.
