Peso weakens on BSP chief Diokno’s ‘dovish’ remarks
MANILA, Philippines — The Philippine peso weakened against the dollar on Tuesday, after Bangko Sentral ng Pilipinas Governor Benjamin Diokno struck a dovish tone and said possible cuts in required reserves imposed on banks might happen “in the next four quarters.”
The local currency ended Tuesday at P52.7 against the US dollar, 50 centavos weaker than its previous finish of P52.2.
The peso opened at P52.13 versus the greenback on Tuesday, while its best showing stood at P52.11.
“[Diokno’s] ‘dovish’ remarks probably triggered it,” said Ruben Carlo Asuncion, chief economist at the Union Bank of the Philippines.
“However, the sentiment on global growth may have been a bigger factor,” Asuncion added.
In a television interview earlier in the day, Diokno said that “if we have to ease [monetary policy], it’s because really our reserve requirement ratio (RRR) is very high.”
“I think there’s room for monetary easing. It could be one percentage point every quarter for the next four quarters. We’ll look at the data and see,” Diokno told ABS-CBN News Channel.
“We will look at the need of the economy. We have a fast-growing economy. In fact, I was told growth is much faster outside Metro Manila than inside Metro Manila. And so if there’s a need for monetary easing, I think we’ll consider it,” he added.
Reducing the amount of cash that banks must hold as reserves will inject more money in the financial system, letting lenders deploy more funds for lending and investments.
Last year, the BSP trimmed the RRR twice to 18 percent from a global high of 20 percent in a bid to fuel economic growth.
Known for his expansionary fiscal policy stance while he was a budget secretary, Diokno — who is widely seen by the market as a dovish BSP governor — will face a tough balancing act of reining in soaring prices without hurting the economy amid a softer global outlook. — Ian Nicolas Cigaral
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