“Philippine Peso Hits Near 12-Year Low” is good news for expats who convert their US Dollars to the Philippine Peso. The Manila Times reports that the peso weakened to a near 12-year low anew on Thursday. One bank analyst attributed the peso’s decline to a central bank decision to cut bank reserve requirements.
The currency closed 8 centavos down at P52.55 to the dollar, its lowest since a P52.74:$1 finish on July 19, 2006. As this article goes to press, Bloomberg shows a slightly weakening of the Philippines Peso even more to 52.56.
The peso fell to an all-time low of 56.45 in August 2004.
ING Bank Manila senior economist Joey Cuyegkeng said the Bangko Sentral ng Pilipinas’ decision to order another one-percentage point cut in the reserve requirement ratio had been anticipated by banks, which “partly explains [the]Philippine peso’s recent underperformance.”
The RRR is the proportion of current deposits that banks need to keep with the central bank against the sum they can loan out to borrowers.
Bangko Sentral ng Pilipinas (BSP) is the central bank of the Philippines which determines the archipelago’s monetary policy. Its counterpart in the United States is the Federal Reserve.
On Monday, in a report from The Manila Standard, Cuyegkeng earlier said the factors pulling down the peso were higher crude oil prices due to political risks surrounding the withdrawal of the US from the Iran nuclear deal and recent Israeli attacks on Iran installations in Syria.
“Net oil importing economies like the Philippines are affected and partly seen in the peso),” Cuyegkeng said.
He also said that the Philippines had returned to a situation of twin deficits—fiscal and current account.
Cuyegkeng also noted that the maturity of P130 billion in fixed rate treasury notes issued by the government had also boosted liquidity.
“This combination is seen to be Philippine peso negative until BSP starts to siphon off the liquidity through its weekly term deposit auction. which was cut by P10 billion to P110 billion,” he said.