MANILA, Philippines - Regulators would rather that the local currency the peso was stable and loathed to see it swinging from one end to another and, for the nth time, indicated a willingness on Tuesday to intervene at any point to drive home the message the exchange rate was best left alone.
Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr., who is on official mission abroad, sent a mobile phone message saying the central bank would not hesitate to make its presence felt in the market should this be warranted.
He was apparently piqued by research notes anticipating the peso to strengthen beyond P40 per dollar around year’s end and stay at this level the rest of 2013.
The peso has strengthened by less than half a percent the past 30 days and was 4 centavos stronger at the close of trading on Tuesday at the Philippine Dealing and Exchange Corp. (PDEx), the local currencies market.
It was also broadly unchanged at the PDEx, the exchange rate having averaged P42.246 per dollar from P42.245 per dollar on Monday.
He stressed that a stable currency “allows business room to plan and strategize better” and that experience taught this policy to be “fair, efficient and equitable.”
“The peso has been strong in large part due to inflows, which are market reactions to our positive macro fundamentals. We have tools besides market presence that we will be employing when we see these are needed to maintain price and financial stability,” Tetangco said.
“We have always maintained that external competitiveness is more than the exchange rate. It is principally increasing productivity, and reducing cost. The exchange rate affects different sectors differently, that is why the BSP does not target a particular exchange rate but instead maintains a presence when the volatility is excessive,” he added.
There had been comments on the BSP scaling back its policy rates another 25 basis points at its last rate-setting meeting in part to soften the impact of the peso’s strength on its bottom line, the BSP having sustained more than two years’ worth of losses since the global financial crisis in 2007 and 2008 have encouraged the flow of foreign capital to emerging markets with strong macroeconomic underpinnings like the Philippines.
For Deputy BSP Governor Diwa C. Guinigundo, the string of losses was a small price to pay for keeping the peso stable.
The BSP’s open market operations help keep the peso stable and subsequent moves to sterilize the inflationary impact of the injection of peso liquidity with each purchase of dollars from the market ensures prices do remain stable.
Guinigundo also said the BSP continues to look for ways to encourage businesses and households to purchase more dollars than they do at present.
But he pointed out the existing limit on dollar purchases for travel and similar purposes without having to present supporting documents has never been breached so there is no sense increasing the limit again.