Authorities won’t put up with speculative play on peso
Rate has ‘sufficiently adjusted’
Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. yesterday said they will not put up with any speculative attacks on the peso especially now that the exchange rate has “sufficiently adjusted” and settling to an appropriate level.
Espenilla said the peso adjustments which are normal and expected, may have created market uncertainty and speculators could be tempted to take advantage of the currency depreciation by “exaggerating for financial gain an otherwise healthy price correction to recover some of the price competitiveness.”
“The BSP will not tolerate such speculative behavior and stands ready to use its very ample international reserves and deploy its full policy and regulatory arsenal if necessary,” he warned. “In any case, we think that the peso has now sufficiently adjusted and can be expected to regain relative stability going forward.”
The peso fell to an 11-year low of R51.49 versus the US dollar last Friday, peaking at R51.63, from a previous close of R51.35, based on the Philippine Dealing System. The exchange rate volume climbed to $1 billion on that day. According to the BSP, the peso averaged R49.43 in January and R50.63 in July. It has lost three percent or R1.53 since the first trading day of 2017.
Espenilla said at the end of the day, the BSP is all about enabling a market with a “flexible and adaptive exchange rate policy” that would “keep its interest rate policy settings squarely focused on achieving the inflation target.” This would ensure a non-inflationary economic growth path as a low-inflation environment will dampen consumption and will support a “more investmentand export-led growth that the economy needs to sustain its strong momentum over the long haul.”
“Some commentators of late would have us judge negatively the state of the Philippine economy merely on the basis of the depreciating trend of the peso against the US dollar. In particular, the peso is compared in unfavorable light against ‘stronger’ regional currencies,” commented Espenilla. “That’s a rather simplistic way to look at it.”