BSP won't let forex situation go out of hand - Buenaventura

Bangko Sentral ng Pilipinas Gov. Rafael B. Buenaventura said over the weekend that the BSP would not let the foreign exchange situation get out of hand, even as the BSP continues to refrain from actively intervening in the forex market.

In a press conference, Buenaventura traced the weakness of the peso to the demand by some entities with maturing peso Euronotes.

According to Buenaventura, those holding on to such instruments are now in need of dollars to meet their obligation.

He said the corporate demand is not that big. The BSP chief acknowledged, though, that if there is really corporate demand, "we are willing to provide liquidity."

He added that "we will not let it (forex movement) get out of control."

Buenaventura said the BSP intends to look into the Euronote maturity which is causing some pressure on the peso. He said he had been against the issuance of such notes a couple of years back because it basically allowed the peso to be internationally traded.

Allowing the peso to be internationally traded, Buenaventura said, subjects the local currency to volatility.

Aside from the Euronotes, Buenaventura also noted that some banks maybe taking advantage of the situation to drive down the peso. At some point, however, Buenaventura said, "they will feel that it is overdone and they will start selling again."

The BSP head said the continuing decline of the local stock market is also contributing to the weakness of the peso.

The peso last Thursday (March 30) and Friday (March 31) had fallen below the psychological level of P41 to $1.

Buenaventura predicted that the peso would eventually normalize and hover around P40.50 and P41 to $1.