The peso weakened further on Wednesday, reaching the 45 to a dollar level, its lowest in three years.
The local currency shed 18 centavos from the P44.81 to a dollar close on Tuesday.
The Bangko Sentral ng Pilipinas (BSP) said the movement of the peso is being influenced by a number of factors.
“These would include the uncertainty about the speed and the duration of the Fed tapering. That’s the main factor,” BSP Governor Amando Tetangco Jr. said.
Last year, the United States (US) Federal Reserve announced that it would start to reduce its $85 billion a month quantitative easing (QE) program to $75 billion.
Beginning this January, the Federal Open Market Committee would cut its monthly long-term Treasury purchases to $40 billion and mortgage-backed securities to $35 billion a month, which means a $10-billion reduction in the US bond-buying program.
“And then you also have still remaining questions about the ability of Europe to achieve economic growth and continued with the financial sector reforms that they have started to implement,” Tetangco added.
He said that another factor is “global rebalancing,” where advanced economies are beginning to show signs of economic recovery while emerging markets are slowing down.
“Put all of these together, the impact on investors is for them to review their portfolios and see if they have to also, from their point of view, rebalance their portfolios,” Tetangco added.
He said the behavior of the peso is quite widespread. However, he explained that the country’s exchange rate movement was in the middle compared to the exchange rates of other emerging economies affected by the Fed tapering.
“We are not the most depreciated, we are not the least depreciated. So we’re in the middle. And then in terms of volatility, also, we are at the middle of the range of volatility,” Tetangco said.