BSP: Peso depreciation due to dollar strength, not poor performance

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona on Wednesday said he would not categorize the Philippine peso’s recent performance as “poorly”, saying it was just adjusting to events and its recent depreciation was more a reflection of the greenback’s strength.

In a press conference in Manila, Remolona said the peso was adjusting to several events overseas — initially the events in the Middle East, and today to a speech by Federal Reserve chair Jerome Powell.

“I think it’s adjusting to Powell’s speech that maybe they won’t ease until September or September is kinda how people interpret what Powell said, so there’s a postponement of when the FOMC (Federal Open Market Committee) will ease, so that has meant the weakening of other currencies,” he told reporters.

“So it’s not the case of a weak peso, it’s the case of a strong dollar. Unless the movements are very sharp, we tend to allow the adjustment to happen,” he added.

The Philippine peso depreciated by 19.2 centavos to close Tuesday at P57:$1, its worst performance in nearly 17 months since it closed at P57.375:$1 on November 22, 2022.

This came after tensions escalated in the Middle East, as Iran launched explosive drones and fired missiles at Israel late Saturday, increasing the potential threat of a wider regional conflict.

Remolona on Wednesday said he thought that the parties would “pretend” to retaliate with one another, but this would “not be massive” and he hoped that hostilities in the area would not escalate further.

In terms of the impact of the peso’s depreciation on inflation, Remolona said movement has not been significant enough, but this could possibly be a factor in the next policy meeting of the Monetary Board scheduled on May 13, 2024.

“The magnitude of the adjustment of the peso has not been large enough to affect inflation expectations so for now, I think the impact on Monetary Policy is, I would say, not large,” he said.

“It might be a factor depending on what happens between now and the next monetary policy meeting, but the adjustment so far is not gonna change what I think we might be doing,” he added.—AOL, GMA Integrated News