DBCC adopts softer outlook on Philippine peso

The inter-agency Development Budget Coordination Committee (DBCC) now expects the Philippine peso to trade against the dollar at a weaker range than previously announced, the Department of Finance (DOF) announced on Sunday.

"DBCC's forecast for the years 2018 to 2022 was adjusted to P48 to P51 per dollar, due to the resumption of the US Federal Reserve's monetary policy tightening that could put more pressure on the peso," it said in an emailed statement.

The DBCC last year said it expects the peso to trade within the P45 to P48:$1 range during the term of President Rodrigo R. Duterte.

Year-to-date, however, the peso has already lost 44.5 centavos as it closed last Friday at P51.165, weaker than the P49.720 on December 29, the last trading day of 2016.

"Currency movements in Asia are a complex product of external and internal economic factors," Finance Undersecretary Gil S. Beltran said.

"But in the case of movements from 2008 to 2017, these are mostly accounted for by external factors, mainly the Fed QE (quantitative easing) policy," he added.

To recall, the US Federal Reserve raised interest rates in June, the second time in three months, lifting its benchmark lending rate by a quarter percentage point to a target range of 1.00 to 1.25 percent.

For his part, Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. in August said the recent depreciation of the peso should not be a cause for worry, as it is not expected to lead to a "free fall."

The peso has since breached the P51:$1 mark, reaching an intra-day low of P51.08:$1 on August 11.

The BSP said, however, that the Philippines currently has a "huge pile" of foreign exchange reserves which may be tapped should stabilization be needed. — BM, GMA News