Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura said the BSP is closely watching the reeling peso, with market players showing some degree of nervousness following regional weakness and domestic concerns.
"No question, it’s the regional weakness that pulled down the peso, we’re right in the middle of it, everybody was weakened by the US dollar," Buenaventura said, stressing that the peso, which dropped by around six percent is none the worse compared with other Asian currencies.
He said that on a year-to-date basis, the Indonesian Rupiah dropped 14 percent versus the dollar; Japanese yen, nine percent; Thai baht, five percent; and Singapore dollar, 5.5 percent.
At the weekly Treasury bill (T-bill) auction, interest rates on all maturities were up, with yields for the benchmark 91-day T-bills rising by 10.9 basis points to 8.958 percent from 8.849 percent a week ago.
"The peso and the budget deficit all add up to the bearishness of the market," a dealer from a local bank said.
Despite the peso’s battered condition, the BSP is resisting pressure the raise interest rates to defend the sagging peso. Nor did it intervene to prop up the local currency.
"No, we did not intervene in the market. We’ll see how the market develops. There’s a degree of nervousness because of the peace and order situation. The Argentina problem is not helping up," Buenaventura said.
At the Philippine Dealing System (PDS), the peso immediately tumbled to 53.280 to the dollar and went downhill from there when it ended at 53.710 against the greenback.
The peso was trading at an average of 53.503 against the greenback, and a low volume turnover of $50.4 million indicated the lack of liquidity in the system.
Reacting to the peso’s fall, the 182-day T-bills went up by 31.70 basis points to 10.849 percent from last week’s 10.172 percent while the rates for the one-year T-bills surged 34.90 basis points to 11.768 percent from 11.419 percent a week ago.
Buenaventura also said the peso’s depreciation was also due to the wait-and-see attitude of the market.
"The market is not moving because they are probably waiting for results of the bold measures announced by government," he said.
Buenaventura added the market is also concerned about the possible "contagion" effect of the Argentinian crisis, especially if Latin America’s third biggest economy defaults on its payments with the International Monetary Fund.
"This could further curtail the inflows of fresh funds into emerging markets," the BSP chief said.