New BSP chief says peso performance is “business as usual”

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MANILA — Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr. said there is nothing to worry in the current performance of the peso despite its nearly 11-year low close to a greenback Thursday.

The peso finished Thursday at 50.67, slightly weaker than its 50.60 finish a day ago and already near its 50.73 close on Sept.1, 2006.

Espenilla said “the latest peso movements broadly reflect prevailing market conditions and underlying economic fundamentals” and is “in line with BSP exchange rate policy.”

“BSP is, nevertheless, actively managing excessive volatility. This is business as usual,” he said.

The central bank chief traced the peso’s weakness to the normalization of US interest rates.

”There is also growing policy convergence with Europe and even Japan,” he added.

The Fed has increased its key rates by a total of 100 basis points since December 2015, after keeping rates between zero to 0.25 percent starting December 2008.

Its Federal Open Market Committee (FOMC) hiked key rates by 25 basis points each in December 2015, December 2016, and March and June 2017 on continued improvement of the world’s largest economy.

Fed Chair Janet Yellen, after the Committee’s meeting last June 13-14 also announced the possibility of scaling back the central bank’s balance sheet.

Based on the minutes of the Committee’s meeting last June, which was released Wednesday, FOMC members are united in the proposal to reduce the Fed’s securities holdings and this, a trader said, further backed the US dollar against other currencies in Asia, among others.

The trader added that any cut in the Fed’s balance sheets is equivalent to a rate hike.