BSP can manage new round of peso volatility

The Philippine central bank can manage further bouts of volatility in peso as monetary authorities elsewhere prepare to unwind their policy of easy money, its governor said.

The peso has dropped 2.4 percent against the US dollar so far this year to near 11-year lows, making it Asia’s worstperforming currency.

“We are ready, we can manage the market,” Bangko Sentral ng Pilipinas Governor Nestor Espenilla told Reuters on the sidelines of a business forum.

The next round of volatility could happen when the US Federal Reserve hikes interest rates, he said.

“The peso is relatively stable after initial adjustments. You just have to run with the volatilities,” Espenilla said.

The central bank warned traders in August that it would intervene in the currency market to curb any speculative activity.

The Fed will issue its latest policy decision later on Wednesday after a two-day meeting but is expected to keep interest rates unchanged for now. Still, currencies could move if is seen dropping any hints as to changes in the future rate outlook.

Apart from gains in the dollar, investor concerns that the Philippines could post its first current account deficit in 15 years in 2017 have also weighed on the peso.

Manila had forecast a deficit of $600 million on higher imports of capital goods, mainly infrastructure-related, compared with a $601 million surplus in 2016.

Espenilla also said the central bank is drafting the next wave of foreign exchange guidelines that will allow easier registration of foreign loans and cut cost of doing business in the Philippines.

The circular, which will capture more data on foreign loans, will be ready by October, he said.

A construction boom and a strong agriculture sector fueled 6.5 percent growth in the country’s gross domestic product in the second quarter, outpacing the 6.4 percent expansion in the previous quarter. (Reuters)