DOF Economic Bulletin on Exchange Rate Volatility

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DOF Economic Bulletin on Exchange Rate Volatility

The Philippine peso has been moving in tandem with Asian currencies amid severe exchange rate volatility spawned by the global trade war, the Turkey-Argentina crisis and the Fed monetary normalization.

Year-to-date, the Philippine peso depreciated by 7.39%, ranking 3^rd among 12 currencies of the fastest growing Asian countries. The most depreciated currencies were Indian rupee depreciating by 11.7% and Indonesia, by 9.0%. Following the Philippine peso are the Chinese yuan (down 4.97%) Korean won (down 4.46%), and Taiwan dollar (3.46%). The countries experiencing the highest depreciations were among the fastest growing countries---India at 8.2%, China at 6.8%, the Philippines at 6.3% and Indonesia at 5.1%. (Table 1) These are also the countries with the highest GDP growth rates---India at 8.2%, Philippines at 6.3% and Indonesia at 5.2%.

Since July 31 when emerging markets were the target of adverse hot money movements as contagion spread from problems in Turkey and Argentina, the Philippine peso depreciated by 0.82%, ranking 5^th among 8 Asian countries whose currencies depreciated.

The coefficient of variation shows that the volatility level of the Philippine peso (at 1.91%) YTD reflects the average for all 12 Asian countries. Volatility ranges from 0.14% for Hongkong to 3.13% of China.

Table 1. Asian

Currency/US$ 31-Jul-18 31-Aug-18 04-Sep-18

2018 YTD Percent

Change

2018 Jul 31-

Sep 4 Percent

Change VOLATILITY*/

2018 YTD

China (CNY) 6.82 6.83 6.83 4.97% 0.21% 3.13%

Japan (JPY) 111.86 111.03 111.53 -1.03% -0.30% 1.27%

India (INR) 68.55 71.00 71.35 11.70% 4.08% 3.03%

Philippines

(PHP) 53.10 53.56 53.54 7.39% 0.82% 1.91%

Singapore (SGD) 1.36 1.37 1.38 3.00% 1.07% 1.61%

Korea (KRW) 1,117.73 1,113.07 1,115.02 4.46% -0.24% 2.16%

Thailand (THB) 33.21 32.77 32.78 0.64% -1.27% 2.18%

Vietnam (VND) 23,258.00 23,299.00 23,299.00 2.65% 0.18% 1.01%

Malaysia (MYR) 4.07 4.11 4.14 2.31% 1.84% 1.74%

Indonesia (IDR) 14,414.00 14,710.00 14,780.00 9.04% 2.54% 2.93%

Hong Kong

(HKD) 7.85 7.85 7.85 0.45% 0.00% 0.14%

Taiwan (TWD) 30.63 30.72 30.76 3.46% 0.45% 1.84%

Average 4.09% 0.78% 1.91%

SOURCE:

BLOOMBERG

*/ Coefficient of

variation

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DOF View

Maintaining good macroeconomic policies, thru manageable fiscal and BOP balances, and adopting economic reforms thru tax reforms and still the best way to sustain growth and investment and, at the same time, steel the economy from external economic shocks.

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