Bangko Sentral ng Pilipinas expects the peso to regain strength, as the market begins to digest the country’s strong economic fundamentals.
Bangko Sentral Deputy Governor Diwa Guinigundo issued the statement after the peso fell to an eight-month low of 47.99 against the US dollar Friday.
“The recent weakness of the peso abstracts from both macro-fundamentals and negative sentiment. Based on our sound market indicators, including the sustained external payments surpluses and significant gains in our dollar reserves, the peso should be firm,” Guinigundo said in a text message over the weekend.
Guinigundo said given both external and domestic factors driving market sentiment, soft patches were seen in the foreign exchange market and foreign investors were nervous because of the uncertainty surrounding the latest US Fed decision and general weakness in global economic activity.
He said any concern about the sustainability of macroeconomic policy should be tempered as the government vowed to pursue the same policies that produced robust growth, low inflation and interest rates, sustainable fiscal position and sufficient external buffers in the next six years.
“Over time, we expect that market to digest the solid macroeconomic foundation of the Philippine peso,” Guinigundo said.
Bangko Sentral Governor Amando Tetangco Jr. said the decision of the US Federal Reserve to keep interest rates unchanged Wednesday would slow the weakness of the peso against the greenback.
The Fed decided to maintain interest rates unchanged but hinted that it could still raise the rates before the year ends.
“The recent weakness in the peso has been due to a number of factors. In the last two weeks, the European Central Bank, Bank of Japan and the Fed held policy meetings. It is normal price action that in the runup to these meetings, volatility heightens and markets become defensive and take profit on positions,” Tetangco said.