The Bangko Sentral ng Pilipinas (BSP) has expressed readiness to enter the foreign-exchange (forex) market, after the peso-dollar exchange rate breached the 44 level anew on Monday due to expectations of statements favoring a nearer-than-expected interest hike in the United States.
In a statement sent to reporters on Monday, BSP Governor Amando M. Tetangco Jr. said that while their foreign-exchange stance is still dictated by market forces, they keep room for official action to guard against “excessive volatility.” “We have the tools to address potential further excesses,” Tetangco added.
Data from the Philippine Dealing System (PDS) showed that the local currency hit 44.18 against the US dollar at the beginning of the trading week. This is 27 centavos weaker from the previous trading day’s close at 43.91 to a dollar. The total traded volume is at $728.7 million.
This is the weakest value of the peso in about four months, or when the peso hit 44.19 to a dollar on May 8 this year.
The BSP said markets were spooked by the expectations of further hawkish statements from the US Federal Reserve (the Fed)—which is to hold its meeting this week.
“The way we see it, today’s move in the regional currencies basically reflects market expectation of more hawkish statements from the Fed,” Tetangco said.
“Overnight, the peso decline was somewhat in the middle of the range of regional currency moves,” he added.
The Federal Open Market Committee will be having its meeting on September 16 and 17 to formulate its own monetary-policy stance based on their assessment of recent economic developments in their country.
The recently released minutes of its last policy meeting showed a more stringent debate among officials on the pace of the inevitable rise of interest rates in their jurisdiction. Some officials expressed that the positive data on the US recovery is already enough to warrant a move toward hikes in policy rates in the country. These statements have been read by market players as potential hints that the US will normalize interest rates earlier than expected.
Tetangco has earlier expressed that the central bank is prepared to counter a possible earlier-than-expected rate hike in the US.
In its latest policy meeting, the central bank took a more aggressive stance to raise its interest rates on overnight rates and SDA interest rates. Among the reasons cited was the adjustment of the country to the expected rise in US policy rates after its exit to its quantitative-easing program.