BSP: Fed Rate Forecast Will Weaken Peso Against Dollar

ABS-CBNnews.com

Posted at 09/18/2014 3:25 PM | Updated as of 09/18/2014 3:25 PM

MANILA, Philippines – Bangko Sentral ng Pilipinas (BSP) said the Federal Reserve’s higher rate forecast for next year will make the peso and other currencies weaken against the US dollar.

“The Fed’s higher rate projections and contrasting these with expected policy moves in other advanced economies and markets could still view this as supportive of generalized USD strength,” BSP Governor Amando Tetangco said.

Tetangco said the Fed forecast, together with more “stimulus” or money printing by Europe and China, will reduce the amount of dollars in the market relative to other denominations.

The peso’s weakness is good news for OFWs because their dollars will buy more pesos for their families here in the Philippines, and exporters, because the dollars their customers pay will also bring them more pesos.

But it’s bad news for importers, as they will have to pay more pesos for goods produced abroad.

Tetangco, though, does not expect the dollar-peso exchange rate to move wildly.

And if it does, he says the BSP will be there to smoothen out any rapid changes.

“We don’t expect wild swings in regional currencies post this Fed action. Nevertheless we will continue to monitor developments closely, and maintain a presence in the market as needed to smoothen excessive exchange rate movements,” he said. – ANC