Philippine central bank head seeks calm as peso hits 11-year low
Manila, Philippines - Bangko Sentral ng Pilipinas governor Nestor Espenilla called for calm on Sunday after the peso fell to an almost 11-year low against the dollar last week, saying the currency isn’t expected to free fall given the nation’s strong economic fundamentals.
“The peso is market-determined. It’s natural for it to show volatility as it adjusts to market conditions and all the short-term uncertainties such as increased tension in North Korea,” Espe- nilla said in a phone message to reporters. “We don’t expect it to do a free fall because our economic fundamentals now, unlike before, are solid and very strong.”
The peso has lost 2.5 per cent this year, making it the worst performer among 12 Asian currencies tracked by Bloomberg. It weakened to 50.98 to the greenback on Friday, the lowest since August 29, 2006. The currency has been dropping as the nation heads to its first current account deficit in 15 years. Geopolitical concerns have also spurred a flight to assets of advanced economies. Still, the nation enjoys strong domestic demand and is one of the fastest-growing economies in the world.
“The peso is capable of correcting itself as the market calms down and digests the relevant information,” Espenilla said. He added that the central bank can act ‘strategically’ if there’s excess volatility, noting a ‘huge pile of FX reserves’.
Espenilla, who took over as central bank chief last month, also said that the Philippines, as an emerging market economy seeking to grow, is bound to run moderate current account deficits as it catches up on investments, particularly on infrastructure.
“Lets calm down. We’re on the right track,” Espenilla said, rejecting what he termed as ‘fearbased hand wringing in some of the coverage’.