The Philippines has just set an official record: Ps46.610 to the dollar on October 4, 2000. The Philippine peso has never been cheaper in recorded history.
The previous record was Ps46.550 set on 7 January 1998 at the height of the Asian financial crisis.
However, after hitting the record low in the morning, the peso inched up later in the day when the heavy hand of the central bank, Bangko Sentral ng Pilipinas (BSP), was felt to bring the day’s closing price to Ps46.460 much stronger than the day’s opening of Ps46.490.
The day’s volume was $139.2 million about 61% bigger than the previous day. Some quarters estimate that the BSP injected about $75 million into the Philippine Dealing System (PDS), the country’s interbank currency trading system.
The Philippine peso had breached several 32-month lows in September but corresponding trading volumes were small. The BSP has adopted a hit and run approach, intervening only to provide liquidity but the intervention was never sustained, nor substantial.
But throughout its flirtation with the depths, the peso never caused panic among the general public. There are no queues to hoard on imported goods, no panic withdrawal of bank accounts to convert into them into dollars with the moneychangers, nor queues to stock up on food. It seems the Filipinos have developed a detached attitude to the dollar scoreboard.
Indeed, instead of the panic-buying of dollars, the trading volumes at the PDS ranged only from $70 to $120 million, in a country where the top three oil firms together have a monthly requirement of $300 million.
In short, while the interbank traders were driving the peso down, the people ignored the value of the peso. If at all, many families are happy because the $8 billion annual remittances from overseas Filipino workers buys more goods.
Many analysts have seen the futility of any intervention to prop up the peso as these would only be swallowed whole by the currency speculators. By declaring a policy of simply providing liquidity when needed, the BSP saved its important dollars. The question is not the level of the peso but its volatility.
The day's activity
The trading action started at 9am when the PDS opened with Ps46.490 trade, a weaker position than the previous day’s closing of Ps46.465.
By 9:30 the PDS volume stood at $41 million, a small amount, considering the PDS handles all currency trades among the Manila-based banks. The average price of the peso was 46.547.
By 9:45, the volume rose to $52.50 million with an average price of Ps46.556 to the dollar.
When the clock struck 10, the trading volume reached Ps57.5 million. There was no indication of panic buying but the traders now felt the BSP dollars hitting the market. The peso stood at Ps46.490 the same level an hour prior when the PDS opened.
By quarter to eleven, the volume reached $66 million with an average price of Ps46.563.
At 11am, PDS volume was $67.50, not a significant volume and the average price remained at Ps46.563.
At 11.30, the volume suddenly leaped to $90.50. The $23 million increment in the past half hour could be ascribed to BSP’s intervention.
In the ensuing half hour, another $11 million were traded and when the PDS closed for the morning, the average weight of the peso was Ps.46.569.
In the afternoon trading another $58.2 million were traded at an average price o fPs46.560.
At 4 pm at which the PDS closes, the total volume for the day was $139.2 million compared to the previous day’s $86.5 million.
Altogether, while the peso plumbed to hitherto unknown depths, trading in the country’s interbank currency market showed no signs of panic. The BSP did intervene to provide liquidity but on the whole it was just another trading day.
While it cannot be denied the fiscal position of the government is putting pressure on the currency and interest rates, the peso’s record-setting performance for the day had more to do with a stronger dollar rather than a weaker peso.
