Peso weakness persists
The Philippine peso was weaker so far this week compared to its position last Aug. 26 as the global financial markets absorbed the latest hawkish comments from United States Federal Reserve
The local currency appeared to approach its historic weakest of 56.45:$1 last seen in 2004, closing at 56.225 on Aug. 30 before improving slightly to 56.145 on Aug. 31.
However, this was weaker than the 56.02:$1 at Friday’s closing.
ING Bank said in a commentary that US Fed chair Jerome Powell’s message last Friday was that in an era of dangerously high inflation, the central bank’s job is to take the steam out of demand.
The bank based in The Netherlands added that considering such a design of US Fed policy, weakness in equity markets and softer data on consumer confidence and spending were not enough to keep the Fed off its tightening course.
“This environment should keep the dollar bid,” ING Bank said. “As we highlighted recently, the Fed seems quite happy with the stronger dollar and once again we are likely to hear the refrain from US officials that ‘the dollar is our currency and your problem’.”
“Heavy positioning is probably the biggest challenge to a further dollar advance,” the bank added. “Other than that it is hard to fight against dollar strength.”
In August, Bangko Sentral ng Pilipinas Governor Felipe Medalla expressed unconcern about the country’s diminishing foreign exchange reserves, saying that these remained adequate and the government has other means at its disposal to shore up the Philippine peso amid a continuously strong US dollar.
