The peso fell this month by the most since September, as a surprise yuan devaluation and the prospect of a US interest-rate increase bolstered demand for dollars.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said on Thursday he saw no need to adjust monetary policy given the improving economy, which expanded 5.6 percent from a year earlier in the second quarter after a 5 percent growth in the previous three months. There’s a 54-percent chance the Federal Reserve (the Fed) will raise its benchmark interest rate this year, based on prices in the futures market.
“The BSP’s signal that it doesn’t see a need to change monetary policy supports the dollar,” said Alan Cayetano, head of foreign-exchange trading at Bank of the Philippine Islands in Manila. “When the Fed hikes interest rates, we may see further pressure on the peso.”
The peso fell 2.1 percent from July 31 to 46.735 a dollar at the close of trading in Manila, prices from the Bankers Association of the Philippines show. Local financial markets will be closed for a holiday on Monday.
All of Asia’s emerging-market currencies weakened this month, as China’s August 11 devaluation of the yuan sparked concern of a currency war. Malaysia’s ringgit and Indonesia’s rupiah led losses, with slides of 8.8 percent and 3.2 percent, respectively.
The dollar headed for its first weekly advance against the euro in more than a month, as a rally in stocks and accelerating growth fueled speculation the US economy will be resilient to a slowdown in China.
The greenback has gained against all its Group of 10 peers except the yen this week as traders increased to 53 percent the odds the Fed will raise interest rates this year, from as low as 46 percent on Tuesday.
The currencies of New Zealand and Australia, which has China as its biggest trading partner, led declines among major counterparts this week.
“The Fed will desperately try to raise rates in 2015, but they’d certainly like to see stability in equity markets before they do,” said Derek Mumford, director at Rochford Capital in Sydney, who sees the dollar strengthening against emerging- market currencies but struggling against the euro. “In equity and currency markets, huge volatility is going to continue.”
The dollar appreciated 1.1 percent during the past week to 1.1258 per euro as of 6:54 a.m. in London, the biggest gain since the period ended July 17. The greenback dropped 0.9 percent over the same period to ¥120.95. It was little changed on Friday.
The MSCI Asia Pacific Index of stocks rose for a third day, following an eight-day losing streak. The US economy expanded at a 3.7-percent annualized rate last quarter, exceeding all estimates of economists surveyed by Bloomberg, a report showed on Thursday. A day earlier, the Commerce Department said capital goods orders increased in July by the most in a year.