The Philippine peso entered the 44 to a dollar territory early on Friday but managed to bounce back to the 43 level as trading closed.
The local currency closed at P43.72 to the dollar, stronger than the P43.80 close on Thursday.
The peso and other Asian currencies weakened on Thursday after the US Federal Reserve decided to reduce stimulus funding for the United States economy.
US Federal Reserve Chairman Ben Bernanke recently announced that the central bank would likely slow its bond-buying program this year as the US economy continues to improve.
For its part, the Bangko Sentral ng Pilipinas (BSP) still believes in the stability of the peso despite the prevailing volatility in the market.
“We will still be seeing the broad stability of the peso in the long run,” according to BSP Assistant Governor for the Monetary Policy Sub-sector Cyd Tuano-Amador.
She said there is a tendency for the markets to overreact in any direction as they continue to digest the news coming from the Fed in particular, and other indicators coming from major economies such as China.
“So once they digested all these bits of news, they will eventually focus on which countries have fundamental stories,” she said.
Amador also said the BSP believes that the Philippines’ growth continues to be fundamentally sound.
She said the BSP has enough instruments to cushion the impact of the weak peso.
“Central bankers are singularly circumspect. They have the full array of instruments that they will continue to look at,” she said.
A think tank also said the peso will further depreciate.
In the latest issue of The Market Call, First Metro Investment Corp. and the University of Asia and the Pacific said that the peso has finally broken away from the P41 to the dollar level where it had been pegged for some time.
The think tank also said the local currency is likely to trade between P41.70 to P42.50 for the rest of second quarter.
It attributed the weaker peso to the evolving strength of the US economy.
“With weaker portfolio capital inflows in third quarter, the peso will continue to have a depreciation bias,” it stated.
However, the think tank considered a weak peso to be good for the economy.
It added that peso depreciation boosts the competitiveness of domestic producers and business process outsourcing while adding to the purchasing power of the families of overseas Filipino workers.
Mayvelin U. Caraballlo