No wild swings in peso trade – BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said yesterday  it does not expect “wild swings” in peso trading as the US Federal Reserve cut its stimulus anew but left rates unchanged.

“(W)e don’t expect wild swings in regional currencies post this Fed action,” BSP Governor Amando M. Tetangco Jr. said in a text message to reporters.

“Nevertheless, we will continue to monitor developments closely, and maintain a presence in the market as needed to smoothen excessive exchange rate movements,” he added.

The peso weakened yesterday to 44.42 to a dollar from its 44.26 finish on Wednesday. The peso’s movement yesterday was in tandem with the depreciation of other currencies in the region, including the Korean won, the Malaysian ringgit, the Indonesian rupiah and the Taiwanese dollar.

The US central bank, following a two-day meeting that ended Wednesday, further slashed its bond-buying program by $10 billion, staying on course to end the purchases after next month.

But the Fed kept its rates unchanged in the range of zero to 0.25 percent, its level since 2008. In a statement, it said the present target range will likely remain the same for a “considerable time” following the end of the bond-buying program.

“Many analysts had anticipated the Fed move to keep the language of maintaining its stance for a “considerable” time after the end of the asset purchase program,” Tetangco said.

“The dollar yields did move up last night, but not in a destabilizing manner. So, with this out, plus the Fed’s higher rate projections and contrasting these with expected policy moves in other advanced economies, markets could still view this as supportive of generalized USD (US dollar) strength, which could translate to near-term weakness in regional currencies,” he continued.

The central bank has always stressed it stands ready to smoothen out any sharp fluctuations in the foreign exchange market as it has kept its policy of allowing the market to determine the rate.

In the eight months to August, the peso has averaged 44.28 per dollar, already near the lower-end of the government’s 42 to 45 assumption.

The BSP’s Monetary Board has raised its key policy rates by a total of 50 basis points (bps) this year to ensure inflation expectations remain anchored.