PHILIP­PINE CEN­TRAL BANK: PESO NOT IN FREE FALL

Cen­tral bank gives as­sur­ance it will guard against ex­ces­sive vo­latil­ity

New Straits Times - - Business -

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

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