Gov’t keeping hands off forex rate — Dominguez

The government will not intervene in the currency market, but assured it is closely monitoring developments affecting the peso, according to the Department of Finance (DOF).

In an interview last Thursday, Finance Secretary Carlos Dominguez said the government would let the currency market “take its course” despite the recent weakening of the peso against the dollar.

“We do not manage the exchange rate, that is determined by the market. We manage inflation and that is done through our central bank,” Dominguez said.

The finance chief also assured there is no need to panic over the peso’s recent weakness against the dollar as the economy has become more resilient against the adverse impact of a weakening currency.

“In the past, the exchange rate impacted inflation rate almost immediately. It no longer does it. We are a much larger economy, much more diversified. The economy is very different from what it was in the 1990s. And we have to thank the administration of (former presidents) Gloria (MacapagalArroyo) and Noynoy (Benigno Aquino III), they had very good economic management,” Dominguez said.

In addition, Dominguez said a weak peso benefits more Filipinos. “I’m not saying that everybody should be happy, but if the majority is benefiting, then we should allow the market to take its course,” Dominguez said.

Dominguez said the beneficiaries include the overseas Filipino workers, the business process outsourcing companies and the local manufacturers.

“We have 10 million Filipinos abroad, let’s say their average family size is five, so that’s 50 million people who benefit, that’s the OFWs only,” Dominguez said.

“The BPOs, we have at least 1.3 million people in the BPOs, their industry becomes more competitive. Local industries can compete against imports,” he said.

According to a sensitivity analysis prepared earlier by the DOF, the government earns P9.5 billion for every P1 depreciation in foreign exchange, higher than the P2.1 billion increase in costs a P1 depreciation causes the government.

This means the Philippines is a net gainer from peso depreciation, as it generates a surplus of P7.4 billion for every peso shed against the dollar.

But Dominguez said the government is closely monitoring the movement of the peso, watching for signs of any sharp changes in the exchange rate.

“What we are watching very carefully is the rate of change. If it goes from 51 to 53 in one day, then that’s worrisome. Let’s put it this way, we are watching it, but we are not panicking,” he said.

The peso last August breached the 51 to $1 level, and closed at its weakest level in nearly 11 years at 51.49 to $1 last Aug. 18.

Monetary authorities have time and again said the weakening of the peso is not a cause for alarm or panic.

The BSP has traced the volatility of the peso to the strong demand for dollars from companies expanding their operations in the country.