The Philippine peso dropped to P44.44 to a dollar on Thursday, following the announcement on the tapering of the bond-buying program of the United States Federal Reserve.
The local currency shed 18 centavos from the P44.26 per dollar close on Wednesday. This is the peso’s lowest level since it depreciated to P44.48 on September 8.
Sought for comment, Jonathan Ravelas, chief market strategist of Banco De Oro, said in a text message that the tapering of the $85-billion quantitative easing program of the US Federal Reserve to $75 billion strengthened the dollar.
“Tapering boosts the dollar,” Ravelas said, noting that less taper improves the value of the US dollar and highlights the improvement of the largest economy in the world.
On the other hand, an analyst said that the Fed tapering next year was generally favorable.
“It’s generally favorable as it removes uncertainty on the timing,” said April Tan, president of Chartered Financial Analysts Institute-Philippines.
She added that in a way, the tapering was already expected, as the weakness which began in May was triggered by concerns of tapering.
Meanwhile, other emerging market currencies also fell in response to the US Federal Reserve’s decision cut back its stimulus program next month, citing a pick-up in the economy.
The dollar edged down against the yen on Thursday after hitting five-year highs in New York City, easing to 104.00 yen in Tokyo from 104.20 yen late in New York City, where it peaked at 104.36 yen—its highest since early October 2008—but still well up from levels just below 103 yen in Tokyo on Wednesday.
At the end of a closely watched two-day meeting, the Fed on Wednesday said that it would reduce its bond-buying by $10 billion next month to $75 billion, citing a string of upbeat data indicating the world’s number one economy is strengthening.
It added that it would likely take “further measured steps at future meetings” if the economy continues to improve while keeping interest rates a record lows “well past the time” the unemployment rate declines below 6.5 percent—its previous cut-off point before tightening monetary policy.
The news sent the greenback surging in New York City as the prospect of fewer dollars sloshing around the financial system boosted demand.
Despite the slight dip on Thursday, analysts said that the dollar’s ascent may not be finished.
Investors were heartened by the US central bank’s assessment that recent upbeat data was “consistent with growing underlying strength in the broader economy.”
Highlighting that trend, data on Wednesday showed sales of new US homes soared in October in the biggest monthly increase in over three decades.
The Fed had said that it would start scaling back its bond-buying program when the world’s largest economy shows signs it is on a solid footing.
Against emerging market units the greenback rose to Tw$29.77 from Tw$29.69 Wednesday, to 1,060.22 South Korean won from 1,052.35 won, to 62.43 Indian rupees from 61.87 rupees.
The US unit also rose to 12,163 Indonesian rupiah from 12,126 rupiah and to 32.41 Thai baht from 32.23 baht.