The peso vis-à-vis the US dollar almost breached P57 on Monday, Aug. 14, after hitting a low of P56.99 versus Friday’s close of P56.315, or a loss of P0.67.

At the end of the spot market trading, the peso managed to close better than its low at P56.78 but still depreciated from its Aug. 11 close of P56.315. Exchange rate volume was at $1.41 billion from $1.43 billion, based on data from the Bankers Association of the Philippines.

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, around the time the peso fell to its intra-day low after opening at P56.45, said they are closely watching the exchange rate ahead of Thursday’s Monetary Board policy meeting.

Remolona said that with its use of monetary policy tools – “the BSP keeps an eye on the exchange rate.”

He reiterated that the tightening of the BSP policy rate by a cumulative 425 basis points (bps) has helped stabilize the peso.

“We have occasionally intervened in the foreign exchange market. This is to avoid destabilizing swings in the exchange rate which tends to upset the markets,” he said Monday during a Philippine Economic Briefing in Laoag, Ilocos Norte.

Remolona reiterated what he has been saying for the past weeks that offering forward guidance as a hint to where the BSP is heading in terms of policy stance is also helpful in smoothening volatility in the peso-US dollar rate.

“(Forward guidance) reduces uncertainty in the market. As a consequence of that, foreign exchange pressures have eased,” he said.

Last week, Remolona commented in a Congressional budget hearing that he hopes the peso will stay below P55 to the US dollar.

Last Aug. 7, the peso depreciated past P56 partly due to the US Federal Reserve’s decision to raise its rates anew in July. The last time the peso was at the P56 level was in mid-June this year.

On Monday though, Remolona said the peso has been relatively stable so far in 2023 compared to other currencies in the region.

The peso, he said, appreciated by 4.9 percent as of early August, relative to its near-high depreciation level of P59 to the US dollar in September and October 2022.

“Compared to our neighbors, the peso has weakened only slightly. The peso is somewhere in the middle (and since) the beginning of the year, the peso has depreciated by less than one percent. This depreciation is smaller than those of our neighbors (such as) Thai baht, Malaysian ringgit, South Korean won and the Japanese yen,” said Remolona.

The BSP uses a flexible and free-floating exchange rate policy which means it is market-determined.