PHILIPPINE CENTRAL BANK: PESO NOT IN FREE FALL
Central bank gives assurance it will guard against excessive volatility
THE Philippine central bank yesterday sought to soothe frayed nerves in the foreign exchange market after the peso hit an 11year low, saying it was not in a freefall and assuring it would be on guard against excessive volatility.
“Let’s calm down,” said Bangko Sentral ng Pilipinas (BSP) governor Nestor Espenilla in a statement, downplaying the peso’s slump to 51.08 to the US dollar on Friday, its weakest since August 2006.
Most emerging Asian currencies fell on Friday as investors dumped riskier assets amid a sharp escalation in tensions between the United States and North Korea.
“We don’t expect it to do a freefall because our economic fundamentals now, unlike before, are solid and very strong. This is reflected in our investment grade (credit) rating,” said Espenilla.
He said it was natural for the peso to show volatility as it adjusted to market conditions and all the “short-term uncertainties” such as heightened geopolitical tension.
The peso was “capable of correcting itself as the market calms down and digests the relevant information”, he said.
Espenilla said the BSP could use its huge pile of foreign exchange reserves to play a stabilising role in the market.
“The BSP stands vigilant... We’re on the right track.”
He also sought to downplay worries about the Philippines running a current-account deficit, which may widen to US$1.6 billion (RM6.9 billion) next year, from an estimated US$600 million shortfall this year, according to the central bank.
For the Philippines to sustain growth, he said it needed to catch up on high quality investments, especially infrastructure.
A construction boom fuelled by President Rodrigo Duterte’s US$180 billion “Build, Build, Build” infrastructure campaign has contributed to the peso weakening amid a recent surge in capital goods imports.
With this trend expected to continue, the central bank said last week the peso was likely to “show continued depreciation”.
Duterte has already approved the auction of 21 projects worth US$16 billion.
The Department of Finance said yesterday the government had approved six new big-ticket projects worth a combined 57.5 billion pesos, including construction of bridges.
Despite a weaker US dollar, the peso has now fallen 2.5 per cent so far this year while most other Asian emerging currencies have racked up solid gains. Reuters