The peso ended flat in Thursday trade, matching its eight-month low of the day after briefly touching the P45.15 level at mid-day as Japan’s recession continued to batter the yen.
The local currency opened at P45.10 to $1 on the Philippine Dealing System (PDS) before trading between P45.15 and P45.07. The unit closed at P45.07, unchanged from Wednesday’s finish.
Total volume transacted on the PDS thinned to $465.6 million from $641.8 million the previous day.
The yen drifted lower on Thursday, hitting multi-year lows against the dollar and euro as investors bet on further monetary easing measures by the Bank of Japan.
In afternoon trading in Tokyo, the dollar rose to 118.45 yen, from 118.01 yen in New York and hovering around its highest level since August 2007.
The euro bought 148.53 yen against 148.11 yen in US trade, the highest level since October 2008.
The common European currency slipped to $1.2537 against $1.2551 in New York.
Here in the Philippines, the central bank said the domestic foreign exchange market on Thursday appeared to have been driven more by the price action in the dollar and yen as well as the developments in Japan rather than the readings on the minutes from the Federal Open Market Committee’s (FOMC) October meeting.
According to Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr., the market read of the FOMC minutes is that there is no shift in the balance of views with respect to the pace of policy normalization in the US.
Fed, BOJ cautiously optimistic
Minutes from the Federal Reserve’s October 28 to 29 meeting showed policymakers were confident enough in the world’s top economy to bring an end to its vast bond-buying stimulus program, a plus for the dollar.
However, they also made clear there was little thought of departing from its current policy of keeping interest rates at the current zero level well into 2015. Most analysts forecast initial hikes around the middle of next year.
“The Fed’s assessment of increased downside risks to growth in EU, China and Japan is something to consider though, even as the Fed’s conviction is that the impact of recent foreign developments on the US economy is ‘likely to be quite limited’,” he said in a text message to reporters on Thursday.
Similarly, policymakers in Japan were offering cautiously optimistic assessments of that country’s struggling economy. Wrapping up a two-day policy meeting on Wednesday, the Bank of Japan (BOJ) kept its upbeat view that the economy was recovering, despite data this week showing the country had slipped into recession.
But the central bank trimmed its inflation expectations, saying that they “appear to be rising on the whole from a somewhat longer-term perspective.”
Many economists believe the BOJ will need to launch further easing measures on top of a surprise asset-purchase plan expansion last month that triggered a fresh round of yen selling.
In view of the news from overseas, Tetangco said the central bank continues to monitor developments across the globe, as well as domestic investor sentiment, to see if there are changes in market risk assessment that could contribute to domestic market volatility.
“We will then determine if there is a need for policy measures to address these,” he said.