Buenaventura due back today; will peso improve?

Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura is scheduled to arrive from his official two-week trip to the US today, prompting most analysts to ask if his return could ease the pressure on the peso which continues to plumb new lows against the greenback.

According to the Bankers Association of the Philippines (BAP), Buenaventura’s ability to calm frayed nerves in the market had already been demonstrated in the past but it remains to be seen whether he will be able to do this again.

"We need a calming effect and he was able to do this before," said BAP executive director Leonilo Coronel. " We will see whether he can do this again although we realize that he will be very distracted by the sheer number of issues that he would be asked to address personally."

According to Coronel, Buenaventura’s reply to the Court of Appeal decision that ordered his suspension was being awaited by the market which was also waiting how the Anti Money Laundering Council would handle the money-laundering charges hurled by Senator Panfilo Lacson against first gentleman Miguel Arroyo.

"I do not envy his position right now," said Coronel. "But the sentiment of the business community is that Buenaventura has the ability to set things back into order."

According to a currency trader from one major bank, the market was waiting for Buenaventura to personally answer to the charges hurled against the BSP by the officials of the defunct Urban Bank of the Philippines which initiated and won their petition to suspend the BSP Governor for shutting down the bank in 2000.

The trader pointed out that although the peso’s weakness was due to a confluence of a several factors, Buenaventura’s presence would ease the tension in the market amid rumors that he was being eased out by Malacanang.

"The BSP governor has a fixed term of office under the law and he could not be easily removed but he could still be pressured to resign if they really worked on it," the trader said.

Although the market recognized the BSP’s capabilities as an institution, traders said Buenaventura "personified the central bank’s powers of moral suasion, " an abstract weapon often used by the BSP in order to keep banks from "straying from the path."

Buenaventura has been known to call bank officials to his office and use "moral suasion" when the peso is behaving too far from economic fundamentals that could easily explain the volatility.

"That’s why it has become very effective in the past," said one veteran banker. "Because banks don’t exactly know what the consequences are if they refuse to yield to this moral suasion. Who wants to find out?"

The BSP has already resorted once to using its "name and shame" weapon in 2000 when it found evidence that banks were speculating on the peso after sending out its examiners to audit their daily forex trades.

On the other hand, Coronel said that in both the local and international business and financial communities, Buenaventura was regarded as the "glue that holds things together."

"Hindi mo maalis talaga yan," Coronel said. "The market had the same attitude towards [US central bank chief] Allan Greenspan at the height of his popularity. He had the same impact on markets."