After depreciating for most of last week, the peso opened this week stronger, closing higher yesterday although it stayed above P58 to a dollar.
The Bangko Sentra ng Pilipinas (BSP) said the depreciation “is only temporary,” given the fact that other currencies in the region are also affected.
The local currency closed at P58.11, higher than Friday’s P58.19 and almost P0.10 stronger than the day’s low of P58.2.
Iluminada Sicat, BSP Senior Asst. Governor, said they are “closely monitoring developments in the foreign exchange market given the recent depreciation of the peso together with other currencies in the region, following the delay in the easing of the Fed.”
“I would like to reiterate the FX policy of the BSP. We do not target any specific exchange rate level, we just let the market determine the level of exchange rate,” Sicat said at yesterday’s Philippine Economic Briefing (PEB).
“Given the fact that all of us (in the region) are being affected by the current position of the Fed, I think this is only temporary and, eventually, once things clear up, it will be the fundamentals that will determine the level of exchange rate,” Sicat said.
“When we enter into the market, we look if there is presence of market stress because if we let the market stress to be left unattended, this would affect inflation expectation and that is something we are avoiding.
We look at market stress, we consider fundamentals. We also look at what is happening around the area, are we the only ones depreciating or not,” Sicat said.
Eli Remolona, BSP Governor, earlier said they “continue to monitor the foreign exchange market but allow the market to function without aiming to protect a certain exchange rate.”
“Nonetheless, the BSP will participate in the market when necessary to smoothen excessive volatility and restore order during periods of stress,” Remolona said.
Michael Ricafort, chief economist for Treasury Group of Rizal Commercial Banking Corp., said the peso “already eased from 1.5-year highs; but still higher by nearly P3 from the immediate low of 55.30 posted on March 12, 2024, more than 2.5 months ago.
“It is interesting to note the US dollar/peso exchange rate somewhat stabilized and somewhat capped at the intraday high of 58.30 during the previous two trading days of the week, amid reiterated signals on possible intervention should there be excessive volatility and to bring greater order in the foreign exchange market,” Ricafort said.
He said the peso was stronger “after the gauge of the US dollar vs. major global currencies corrected to near one-week lows recently ahead of the latest US economic data for the week, as a source of new leads for the markets especially on possible Fed rate cuts.”
“Another positive factor that supports the peso is global crude oil prices lingered among 2.5-month lows or since March 12, 2024 on a closing basis and also among two-year lows or since January 2022,” Ricafort added.
He said the next important resistance level over the past 1.5 years is 58.30-58.50 levels, “or a potential re-test of the record high of 59.00 posted in the latter part of September 2022 and early October 2022.”
