Traders watch impact of BSP move on peso.

Will higher interest rates stop the peso from falling?

Bangko Sentral Gov. Rafael B. Buenaventura last Friday said a one-percentage-point increase in the central bank's overnight facilities is needed to widen the interest differential between peso-and dollar-based investments.

The central bank earlier noticed a "narrowing differential" between the two with investors "showing preference" to greenback assets.

An Asian Development Bank (ADB) study, however, suggests Asian currencies failed to appreciate despite sharp rate increases imposed by their governments.

It even suggests that rate increases may have even worsened the situation since higher interest rates put more pressure on the economy in general.

The debate on the effectiveness of this …