Why BSP 'purposely' allowed 'more volatility' in peso-dollar exchange


Posted at Nov 28 2017 03:48 PM

MANILA - Bangko Sentral ng Pilipinas Governor Nestor Espenilla said regulators "purposely" allowed "more volatility" in the peso-dollar exchange rate to make the market more mature.

The peso strengthened to P50.32 on Tuesday from the previous day's close of P50.51 after Espenilla's comments late Monday on the sidelines of a business forum.

"When you look at exchange rate. We've allowed purposely more volatility in the exchange rate," Espenilla said.

"If people start believing that there’s fixity in the exchangerate, in a world that’s uncertain and has a lot volatility, then you’re creating an artificial environment and people will start making bad decisions," he said.

Investors tend to make "bad decisions" when there's an "artificial environment," Espenilla said. When people believe interest rates will stay low, they accumulate more debt, he said.

"That's something people should've learned from the Asian financial crisis. That's the lesson that we're imparting to the market. We're making the market a lot more mature in processing information," he said.