THE PESO rebounded versus the dollar on Tuesday from a fresh 10-year low after the Bangko Sentral ng Pilipinas (BSP) stepped in during the trading session to moderate the local currency’s sharp movements.
The local currency closed at P50.53 versus the dollar yesterday, surging by 16.5 centavos from its P50.695-per-dollar finish on Monday, which was its weakest close in over a decade or since it ended at P50.736 against the greenback on Sept. 1, 2006.
The peso opened Tuesday’s session weaker at P50.75 per dollar, even sliding to as low as P50.87 versus the foreign currency intraday. Its peak for the session was also its closing rate.
Dollars traded amounted to $629.1 million, climbing from $438.8 million seen in the previous session.
A trader attributed the peso’s gain against the dollar to central bank intervention.
“There’s no other reason than the BSP intervening the session — that’s why the peso closed higher than the dollar,” the trader said by phone yesterday.
As regulator of the Philippine financial system, the BSP sometimes steps in currency trading to temper any sharp swings in the peso. Recently, traders have noted the central bank’s presence in the foreign exchange trading as the local currency hit fresh lows versus the dollar.
For his part, BSP Governor Nestor A. Espenilla, Jr. on Tuesday said the peso’s weak performance against the greenback is not unusual as it only mirrors market conditions and fundamentals.
“It’s actually just reflecting market conditions and underlying fundamentals. We’ve seen nothing particularly unusual about this, it’s the nature of the exchange rate to fluctuate. As far as the BSP is concerned, we’re there, we’re managing excessive volatility,” he told reporters in an ambush interview yesterday prior to the session’s close.
Asked if the regulator is comfortable should the exchange rate reach P51 per dollar, Mr. Espenilla said, “The approach of the BSP is to let the exchange rate reflect underlying market conditions.”
A trader said on Monday that the peso could plunge to as low as P51-to-the-dollar within the month or even as early as next week should regulators not step in.
Asked what level of the peso is alarming, Mr. Espenilla said: “What we look at isn’t much the exchange rate but the underlying conditions. Today, the underlying conditions are quite healthy. As a result, prices reflect those conditions.”
“Our focus is keeping inflation low and banking system strong. These are still existing today. There are many factors that affect this. Right now, there are a lot of external factors that affect the currency. We’ve said volatility is there because of policy uncertainties, political tensions so it’s very difficult to say what’s affecting it on a daily basis,” he added.
Traders have attributed the peso’s recent weakness to offshore developments, particularly the US Federal Reserve, US economy and political uncertainties in Europe and the Middle East, among others.
For its part, analysts at ING Bank said in its Global Markets Research note dated July 10 they project the peso to settle within P51.30 versus the greenback by yearend.
“We revert to our previous year-end PHP forecast since conditions that have argued for a stronger year-end PHP at below P49 have changed,” it said, pointing to “hawkish tendencies of DM (developed market) central banks” other than the Fed.
For today, the trader sees the peso moving within P50.65-P50.70 versus the dollar. — J.M.D. Soliman