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BSP not worried about peso exchange value versus dollar

  • Bianca Cuaresma
  • October 22, 2016
  • 2 minute read
In Photo: President Duterte attends a meeting at the Great Hall of the People in Beijing on Thursday. China and the Philippines have agreed to resume a dialogue on their dispute over the South China Sea, a senior Chinese diplomat said, following talks between the countries’ leaders.

THE Bangko Sentral ng Pilipinas (BSP) is not worried about the recent movements of the peso against the US dollar, and expressed optimism for near-term relief for the local currency’s exchange value.

In a recent press briefing, Central Bank Deputy Governor for the Monetary Stability Sector Diwa C. Guinigundo told reporters markets may have somewhat “reconsidered” their negative sentiment toward the country that has caused them to be more risk averse in investing in the Philippines.

“We should not be bothered by the daily gyrations of the exchange rate. The exchange rate is driven by both fundamentals and sentiment. Fundamentals have not changed. It is the sentiment. And the sentiment happened to be negative in the last two weeks,” Guinigundo said.

“On that basis, it looks like the market has reconsidered; the stock market has rebounded very significantly; and the peso has recovered,” he said.

The local currency is still trading within the 48:$1 territory. At the end of this trading week, the peso hit 48.33 to a dollar, losing about 23 centavos of value from Thursday’s trade. The traded volume was at $779.35 million.

“These are market developments bound to change now and then, but the fundamentals have not changed. We continue to have one of the best fundamentals in the region, and that should not be lost among investors,” Guinigundo said.

While the country’s central monetary authority remains hopeful for the local currency’s value, a recent assessment from the private sector says otherwise.

In its monthly economic publication The Market Call, First Metro Investment Corp. and University of Asia and the Pacific said the local currency is seen to depreciate further toward the end of the year.

“We maintain that [the Philippine peso] will continue to be under pressure until the end of the year due to the consistent US economic recovery,” the economic publication said.

This, however, will not be all that bad for the economy, as a weaker peso could boost private consumption due to the effect it gives to cash remittances sent by Filipino migrant workers back home, especially during the holiday season.

“While the peso may further depreciate in the fourth quarter, this would provide an additional stimulus to the economy, as it gives additional purchasing power to overseas Filipino workers, exporters and related industries, and other domestic producers,” the Market Call read.

BSP Governor  Amando M. Tetangco Jr. earlier said they continue to allow market forces to dictate the movement of the local currency, hence, the recent weakness due to negative sentiment toward the country.

However, the governor has repeatedly said the BSP will remain vigilant and is ready to step in market operations should volatilities become “excessive” in their view.

Image credits: Wu Hong/Pool Photo via AP

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