The Bangko Sentral ng Pilipinas (BSP) said over the weekend that the peso went up over the past nine and a half months but so did the Thai baht, which gained 9.9 percent, and the Indonesian rupiah which strengthened by 7.3 percent.
The only currencies that did not surge as fast as the Philippine currency were the Singaporean dollar which went up slightly slower by 5.9 percent, and the South Korean won which appreciated by 5.7 percent during the period.
Amid worries over loss of competitiveness against the country’s main competitors in the region, officials pointed out that if other currencies were moving in the same direction, the competitive positioning should be more or less the same.
BSP Governor Amando M. Tetangco Jr. said the volatility of the peso was also in the middle of the range when compared with the same basket of currencies.
Thus far, Tetangco said the peso volatility rate was charted at an average 1.8 percent year-to-date, compared with two-percent volatility rate for the Thai baht, two percent of the Indonesian rupiah, 1.4 percent of the Singaporean dollar and 1.4 percent for the Korean won.
In 2005, Tetangco said the peso’s volatility rate was recorded at 1.5 percent. At that time, the Thai baht at 2.8 percent, the Indonesian rupiah was at 3.5 percent, the Singaporean dollar at 1.4 percent and the Korean won at 1.5 percent.
But Tetangco said there has been little need to support the peso at any level since its movement has been grounded on the country’s shifting economic fundamentals.
"What we would consider volatile that needs intervention depends on the market," Tetangco said. "That’s why we have to look at the comparative data."
Tetangco said the most straightforward indicator is the country’s balance of payments position which had consistently stayed at surplus level because of strong inflows from abroad.
"We have been getting strong support from overseas Filipino workers and foreign investors," Tetangco said. "With that kind of inflow going into our international reserves, there will always be strong support for the peso."
President Arroyo had already declared that the government could provide assistance to exporters affected by the strength of the peso but poiinted out it would not cap the appreciation of the peso against the dollar.
Mrs. Arroyo admitted there was concern over the strength of the peso against the dollar, particularly its impact on the export industry. But indicated that pegging the peso at any level was not under consideration.
"We will leave it to the market to determine the foreign exchange rate," she said. "But we will assist exporters with concrete measures outside of the foreign exchange rate."
Meanwhile, the peso is expected to remain relatively strong against the dollar in spite of political restiveness which caused the local currency to fall against the greenback last Friday, an economist said.
"We cannot expect the peso to go to comfortable levels in the short term," Ateneo Center for Economic Research and Development (ACERD) head Cielito Habito said in an interview at the sidelines of the Philippine Business Conference.
Habito said ACERD, using 2003 benchmark, determined that the peso should be currently trading at 53 against the dollar. The peso breached the P50 level this month amid optimism on the country’s fiscal and economic performance.
Dealers said the market remains bullish on the peso, which they expect to appreciate to as high as 49.25 by yearend due to strong remittances from Filipinos working abroad
Banks said the did not want the peso to appreciate rapidly against the dollar because of complaints from exporters that a strong peso was hurting their businesses.
Socioeconomic Planning Secretary Romulo Neri earlier admitted the central bank is trading dollars in an attempt to correct the exchange rate.
Habito, however, disagreed with the practice.
"The solution is not in trying to influence market but in how we can work through it. The discomfort can be eased without interfering," he stressed.
"It is an outside phenomenon we can do little about," the economist added.
Last Friday, the peso closed at 50.105, nine centavos weaker than Thursday’s finish. Currency traders attributed this to the continued tensions in Makati City against embattled Mayor Jejomar Binay and the Department of Interior and Local Government (DILG).
DILG issued a 60-day preventive suspension order against him and 17 other city council officials for allegedly keeping ghost or non-existent employees on the city government’s payroll. – with Ma. Elisa P. Osorio