MANILA - The macroeconomic numbers helping the government anticipate the likely path of the peso this year might be put under review again after the local unit showed significant weakness the past few trading days, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said.
The Development Budget Coordination Committee (DBCC) earlier projected the peso to average between 41 and 44 against the US dollar. This assumption was formulated at the last meeting of the Cabinet-level body in December 2013.
“That was an assumption. It is always reviewed every now and then. When that was formulated, it was in 2013. We need to look at it again,” Tetangco said, when asked about the recent developments affecting the peso and their impact on their latest assumption.
The projected path of the local currency is of critical importance not just for the economic managers who need a clear view of where the exchange rate would likely be
over the near term but also for the various commodities and currencies traders whose foreign-currency transactions range in the millions of dollars.
Tetangco acknowledged that the relative weakness of the local currency was anticipated and did not come as a shock to the economic managers.
“What I am saying, really, is that the weakening of the peso is not totally unexpected, just like the weakening of other currencies,” he said.
The peso had been trading at the 45-per-dollar territory since Wednesday as emerging market currencies weakened on the back of strong sentiment on the US dollar.
This positive sentiment resulted from the US Federal Reserve’s decision that the world’s largest economy would start scaling down its $85-billion monthly asset-purchase program starting this month.
Tetangco said while there had been some guidance from the Federal Reserve, there remains a cloud of uncertainty regarding the speed and duration of the taper, which explains the market volatility.
“As a result of that, there has been a global portfolio rebalancing that led to the weakening of regional currencies, the emerging market currencies, in general,” he said
The BSP governor gave assurance that the sound macroeconomic fundamentals of the Philippines, coupled with its healthy external-payments position, would give the country a “useful buffer against external shocks.”
Tetangco has repeatedly assured markets the past week that the recent peso weakness should not upset the relative stability of the financial markets in the Philippines and that the BSP would be ready to make its presence felt should this be necessary.