The weakening of the Philippine peso is now more apparent as it has reached the ₱51-level against the US dollar. However, this event does not leave the Philippine central bank officials perturbed.
We think this foreign exchange-related report is an educational and relevant one. We believe our readers will learn how foreign currencies such as the Philippine peso get affected by external events and how countries’ central banks react.
According to the report posted online by the Philippine daily newspaper, the Manila Bulletin, an image of the weakening of the Philippine peso happened yesterday, Monday, September 27. The Philippines’ official currency lost its robustness to an 18-month low of ₱51 to US$1, from Friday, September 24’s close of ₱50.65.
The last time that the weakening of the Philippine peso took place, breaking in the ₱51-level, was on March 27, 2020. That period was the beginning of the coronavirus or COVID-19 pandemic in the Southeast Asian country.
Foreign exchange experts explained that the recent depreciation of the Philippine peso versus the US dollar is mainly due to the greenback’s strength. This event happened as investors were on a risk-off sentiment with the coronavirus or COVID-19 Delta variant new cases and the US Federal Reserve System’s impending monetary policy normalization.
Iluminada Sicat explained that exchange rate expectations seem rational, with businesses and consumers anticipating the official Philippine currency depreciating further in the fourth quarter of 2021 and the next 12 months.
The Philippine central bank, The Bangko Sentral ng Pilipinas’s (BSP) Senior Assistant Governor cited that these groups’ expectations are aligned with the BSP’s exchange rate assumptions. Additionally, Sicat pointed out that the weakening of the Philippine peso is due to the economic activity building up, which involves some demand for imports and requires foreign exchange.
The Philippine central bank official also mentioned the surges in crude oil costs. Sicat noted this factor as rising recently due to improved international economic activities, affecting the Philippine pesos-US dollar exchange rate.
Furthermore, BSP Deputy Governor Francisco Dakila, Jr. is another Philippine central bank official who did not seem bothered by the weakening of the Philippine peso.
After all, he noted that the Philippine inter-agency, the Development Budget Coordination Committee, had approved the exchange rate assumptions of ₱48 to ₱53 to US$1 until 2024. Benjamin Diokno is the governor of the Philippine central bank.
He emphasized last week that the foreign exchange market in the country would remain stable despite the recent pressure on the Philippine peso. The BSP Governor also pointed out that the Philippine central bank’s policy of a flexible exchange rate aids in safeguarding the Philippine peso versus speculative attacks.
Diokno mentioned that the weakening of the Philippine peso would not happen with the local currency breaking ₱53 to US$1, despite the US central bank’s hawkish assertions.
He hinted that before that event takes place, the Philippine central bank would employ its wide range of monetary policy tools to deal with foreign exchange market participation and any other short-term volatility.
We laud the Philippine central bank officials for assuring the Filipino public that things would work out just fine despite the apparent weakening of the Philippine peso against the US dollar.
We agree that the greenback’s supply and demand and market fundamentals heavily affect the Philippine peso. Nevertheless, we are aware that the Philippine central bank would do its important job of keeping things stable and not allowing the weakening of the Philippine peso to reach breaking point to the detriment of the Filipinos.