BSP to continue buying dollars

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) will continue buying dollars to manage the peso’s appreciation, a central bank official said, as a report released late last week showed the local currency has become less competitive in the first semester, fanning export worries.

“What we do is to moderate its appreciation by purchasing dollars. Because if you don’t buy, value of dollars may tend to decrease sharply,” BSP Assistant Governor Cyd Tuaño-Amador told reporters last Friday.

The peso has been one of the best performing currencies in Asia, appreciating by 4.23 percent from January to August this year, latest official data showed. A strong currency trims the value of dollar export earnings and remittances from overseas Filipinos.

In the balance of payments report for first semester released last Friday, it was noted that year-on-year, the local currency rose by 1.1 percent due to “the sound domestic macroeconomic fundamentals” of the country.

As of June, it averaged at 42.78 against the dollar from previous year’s 43.75, the report said.

BSP pointed to the continued surge of overseas Filipino remittances, rebound on exports and portfolio inflows as reasons for peso’s strength. Demand for peso rises when foreign exchange inflows — which need to be converted — swamp the country.

Furthermore, the peso’s movement has been slightly more volatile in the in the first six months, the report said. Its real effective exchange rate — or the peso’s value against the region’s other major currencies such as the Singaporean dollar and Malaysian ringgit — also rose by as much as 7.1 percent, suggesting that its “external price competitiveness has weakened.”

The peso’s recent strength has concerned exporters, who claimed of lesser earnings once their dollar profits are converted into pesos.

Amador however shrugged this off. “I think the peso has been moving at a tolerable range right now,” she said.

“We have always been saying that exports should not only be dependent on the pricing. There should also be focus on underlying potentials such as improving our products’ competitiveness,” she explained.

Rosabel Guerrero, director of BSP’s department for economic statistics, agreed, saying “in spite of the very difficult conditions, we are still seeing quite respectable growth” in merchandise exports at 7.7 percent as of first half. A 10-percent growth target has been set for 2012.