BSP seen ready to defend peso vs strong US$

MANILA  -Asian central banks like the Bangko Sentral ng Pilipinas (BSP) are expected to keep their proactive stance toward managing foreign exchange (forex) stability amid local currencies’ weakness against the US dollar, according to Goldman Sachs.

However, the American financial services firm said central banks with low levels of foreign currency reserves face the dilemma of the need to rebuild such stock and to keep the local currency stable.

Goldman Sachs made these comments as the Philippine peso’s trading value hovers around 56:$1, having swayed up and down this mark five times in the past seven business days.

The peso closed at 55.91:$1 last Nov. 6 after three months between 56:$1 and 57:$1. The local currency ended the most recent trading day, Nov. 14, at 56.06:$1.

Goldman Sachs observed that the surge in yields on US debt instruments and the US dollar’s strength during the second and third quarters of 2023 exerted significant upward pressure on the exchange rates between Asian currencies and the green back in the second half this year—Asian currencies were depreciating.

The American group added that several Asian exchange rates tested cyclical lows, or in some cases historical lows, which prompted Asian central banks to be more proactive.

“In some cases, such as Indonesia and the Philippines, the respective central banks even extended their rate hikes further in the fourth quarter to stem [foreign exchange rate] weakness,” Goldman Sachs said. INQ