by Lee C. Chipongian, MB
The peso strengthened vis-à-vis the softer US dollar on Wednesday, Nov. 23, at P56.94, appreciating by P0.43 from its close of P57.37 the day before.
This is the first time the peso was back at the P56-level since the first week of July this year.
Based on Bankers Association of the Philippines data, the peso closed at its strongest on Wednesday, after hitting a low of P57.33, but still better than the previous close.
The spot market’s weighted average rate was P57.203 versus P57.394 last Tuesday. Total volume stood at $687.85 million from $684.40 million.
The US dollar has been weakening in the last month following the US Federal Reserve’s pronouncements of lesser rate increases in the next quarters. The tamer US inflation which was still decades high, is also contributing to the softening of the greenback.
When the US dollar was its strongest, the peso depreciated to P59 on Sept. 29, the lowest exchange rate on record. The previous record was P56.45 in 2004.
The Bangko Sentral ng Pilipinas (BSP) in its latest Monetary Policy Report said the exchange rate could remain above the P55-level until next year and possibly in 2024.
The inter-agency Development Budget Coordination Council (DBCC) has an exchange rate assumptions of P51 to 53 versus the greenback for 2022, and P51 to P55 for 2023 and 2024. The DBCC approved the exchange rate assumptions last July 8, when the peso was at P56.
The BSP said the projected exchange rate reflects “the continued depreciation of the peso as well as higher outlook for US interest rates” and that it was “consistent with cumulative policy rate hikes by the Federal Reserve of 425 bps (basis points) in 2022 and 50 bps in 2023.”
Since June this year, the strong US dollar has caused the peso to sharply depreciate. It fell to P53 on June 10, P54 on June 17, P55 on June 29, P56 on July 7, P57 on Sept. 6, P58 on Sept. 21 and P59 on Sept. 29.
The country’s exchange rate policy supports a freely floating exchange rate system where the BSP leaves it to market forces to dictate the exchange rate level. The BSP will only enter the spot market to ensure “order and temper destabilizing swings” in the peso-US dollar rate.
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