The peso depreciated to its lowest level of P59 vis-à-vis the US dollar on Monday, Oct. 10, from its close last Friday of P58.92, based on Bankers Association of the Philippines (BAP) data.

The first time the peso hit the P59 closing rate was Oct. 3.

The local currency opened Monday at P58.98 and was strongest at P58.95 while the intraday low was P58.999.

From its end-2021 close of P50.99, the peso has depreciated by P8.01 or 15.70 percent. It is one of the worst currency performer in the region, after the Japanese yen and the Korean won.

The weighted average rate on Monday was P58.999 from P58.878 last Friday. Based on the BAP, the spot market volume dropped to $402 million from $483.35 million last Oct. 7.

Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla on Friday said the BSP is not only participating in the exchange rate market but has decidedly intervened to ease pressures off the badly hit peso.

“ combination of those three things – 1) policies that affect interest rates, 2) policies that mean we intervene in the forex market – by the way, we ‘participate’ in the forex market. This time, it’s ‘intervene’ because the level of selling is much higher than normal – and then, of course, 3) the higher interest rates, which is a result of the policy rates increasing and the fact that we will be selling more CB (central bank) bills,” said Medalla during the BSP’s bankers’ night, or its annual reception to the banking community last Oct. 7.

Medalla said the BSP will continue to watch out for and respond to rising interest rates, depreciating peso and “falling international reserves” and “even efforts of the central bank to reduce liquidity by increasing the issuance of CB bills.”

“Thankfully, the new BSP Charter allows us to now borrow from the public and, data shows that BSP or the central bank borrowing from the public is a more permanent form of sterilization ... than when the central bank borrows from banks,” he said

And, despite all three combined factors, especially with a depreciating peso, Medalla added: “I’m confident that the economy should do well. I’m confident that by selecting the correct combination of these three measures, we will be able to navigate.”

The peso has not broken past P60 to the US dollar yet. Last week, the BSP issued a rare call for moral suasion for foreign exchange market players to not engage in currency speculation. It was on Sept. 29 when the peso hit the P59 level intraday for the first time. It closed at this level on Oct. 3.

The BSP reiterated that the peso is only reacting to global developments and the US dollar’s strong position amid rising US interest rates.

The BSP also assured the market that it will continue to service all legitimate US dollar transactions.

The central bank’s foreign exchange policy is a free-floating exchange rate system which means the BSP’s exchange rate policy is dictated by the supply and demand of foreign exchange.

Meantime, the BSP’s level of intervention is limited only to smoothening sharp fluctuations and if there are excessive peso movements.