The Bangko Sentral ng Pilipinas said it will intervene in the foreign exchange market to reduce volatility after the peso fell below the crucial P58-per-dollar mark on Tuesday.

Data from the Bankers Association of the Philippines show that the Philippine peso depreciated to P58.27 per dollar on Tuesday, as regional currencies devalued following recent indications of a Federal Reserve rate drop that would be delayed.

Weakest in 18 months

The local currency shed 37 centavos to close from Monday’s finish of P57.68 per dollar, the weakest in 18 months after the peso closed at P58.275 per dollar on 8 November 2022.

The peso opened the trading day weak at P57.97 compared to P57.68 on Monday. It traded between P58.28 and P57.97. The average level for the day stood at P56.971. Volume increased to $1.620 billion on Tuesday from $1.206 billion last Monday.

In a Viber message, Security Bank Corp. chief economist Dan Roces said the peso’s weakness on Tuesday “seem to be in-line” with movement of other regional currencies.

“Add to that statements by several Fed officials last night reiterating hawkishness and last week’s dovish BSP sentiment which seem to have carried over in yesterday’s and today’s session,” Roces said.

Fed rate cuts

In a separate Viber message, Rizal Commerical Banking Corp. chief economist Michael Ricafort said the US dollar strengthened against the local currency after signals from most Fed officials recently that partly reduced the odds of Fed rate cuts.

In a statement, BSP Governor Eli Remolona said that the central bank will intervene in the market as needed “to smoothen excessive volatility and restore order during periods of stress.”

“The BSP will continue to monitor the foreign exchange market but allows the market to function without aiming to protect a certain exchange rate,” Remolona said.