Peso-dollar rate up to market

MANILA, Philippines - Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said yesterday the peso will remain market-determined in the Philippines, despite the growing tendency of other central banks to intervene in the currency market.

Tetangco was reacting to the decision of the Swiss National Bank (SNB) to intervene in the market and deliberately weaken the surging Swiss Franc in an attempt to soften recession and prevent deflation.

SNB’s decision reverberated across financial markets as monetary officials worldwide sought even more aggressive moves than they have already employed in recent months.

Switzerland’s decision was the latest in a growing list of non-conventional monetary policy moves being made by central bankers in economies hardest hit by the global recession.

The Bank of England has started printing money to buy government bonds to ward off deflation while the US Federal Reserve is buying assets and the Bank of Japan is buying corporate bonds from lenders for the first time.

But Tetangco said the Bangko Sentral ng Pilipinas (BSP) has not exhausted its own chest of monetary policy tools and with the economy still growing amid declining inflation rate, the BSP had some flexibility left over.

Speaking before the annual convention of the Chamber of Thrift Banks (CTB) yesterday, Tetangco said there is no need for the BSP to stray away from its policy of allowing the peso to seek a market-determined exchange rate.

If anything, the BSP is actually looking at the possible revision of the government’s official foreign exchange rate assumption for 2009 which is currently pegged at 45 to 48 to the dollar.

The exchange rate assumption is used by economic planners to determine their macroeconomic projections and target for the year.