BSP says peso stable, warns speculators

The Bangko Sentral ng Pilipinas (BSP) is actively stabilizing the peso as it counters speculative plays in the foreign exchange market.

BSP Governor Nestor Espenilla Jr. told The STAR the peso has sufficiently adjusted after depreciating gradually to the 51 to $1 level last month, based on the assessment of the country’s economic fundamentals.

“At its current 51 range now, that seems to be already a healthy correction. And there we are actively stabilizing to counteract speculators until a new economic fundamental emerges that warrants a shift in battleground,” he said.

The peso is the worst performing currency in the region, shedding 2.8 percent since the start of the year. The local currency continued to flirt to a new 11-year-low closing at 51.17 to $1 last Friday from 49.775 to $1 last Jan 3.

“Rather, based on the assessment of economic fundamentals, we’ve deliberately allowed the peso to moderately and gradually,” Espenilla said.

He reiterated a warning issued last month that the BSP would deploy its full policy and regulatory arsenal against speculators.

“We’re not letting the peso go to wherever the market wants to take it. We can’t allow that because of speculators out for short term gain only,” the BSP chief said.

The BSP adheres to a market-oriented foreign exchange rate policy as it ensures orderly conditions in the market by intervening in the foreign exchange market to smoothen excess volatility.

According to Espenilla, the peso has ufficiently addepreciate justed and has regained relative stability on the back of the administration’s fiscal discipline.

The BSP governor has been warning speculators who may want to take advantage 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,” Espenilla said.

He said the BSP would continue to pursue a flexible and adaptive exchange rate policy.

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

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

“Each economy faces its own unique challenges and should, therefore, be deliberately imple- menting policies that suit its circumstances and needs. The Philippines is doing the correct thing in prioritizing a more investment-led economic growth,” Espenilla said earlier.

According to the BSP official, the better way to gauge the economy is to evaluate its progress toward delivering on things that ultimately matter to the people such as low inflation, growth and jobs.

The country’s gross domestic product growth accelerated to 6.5 percent in the second quarter from 6.4 percent in the first quarter, the low end of the 6.5 to 7.5 percent target set by economic managers.

On the other hand, inflation averaged 3.1 percent in the first seven months of the year despite inching up to 2.8 percent in July from 2.7 percent in June.