BSP moves to curb forex speculation

Keisha Ta-Asan - The Philippine Star
BSP moves to curb forex speculation
BSP Governor Eli Remolona Jr. said the market remained orderly even when the peso breached the 58-to-$1 level earlier this week.
STAR / File

MANILA, Philippines — The Bangko Sentral ng Pilipinas has intervened in the exchange rate market in “modest” amounts to curb speculation as the peso approached a record low on Tuesday, the BSP’s top official said.

BSP Governor Eli Remolona Jr. said the market remained orderly even when the peso breached the 58-to-$1 level earlier this week.

However, he said the BSP intervened in small amounts that day to mitigate the volatility in the foreign exchange market amid broad dollar strength.

“In situations in which the peso depreciates, there’s a tendency for stress. Then the traders tend to offer big amounts when they’re trying to sell the peso, and sometimes the price fluctuates more than before,” Remolona told reporters on the sidelines of the 42nd anniversary celebration of the Capital Markets Development Foundation Inc. on Wednesday night.

“So we try to control that,” he said. “We want those who really need dollars to get the dollars at a reasonable price. We’re just trying to control the speculation.”

The peso remained above the 58-level for the third straight trading day, closing at 58.13 yesterday. This is seven centavos weaker than its 58.06-to-$1 close on Wednesday.

The local unit first pierced the 58 to $1 level on Tuesday to close at 58.27.

The BSP usually dips into the gross international reserves (GIR) – which Remolona said remain at a comfortable level – to smoothen excess volatility in the foreign exchange market.

“The reserves we have exceeds what the International Monetary Fund considers as adequate. They give us a measure of the reserve adequacy. We’re above that,” he said.

The country’s GIR stood at $102.6 billion as of end-April, down from $104.1 billion as of end-March. It represents a more than adequate external liquidity buffer equivalent to 7.6 months’ worth of imports of goods and payments of services and primary income.

It is also about 5.8 times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity.

According to the BSP chief, the Monetary Board’s future policy moves would depend on local economic data and not on what the US Federal Reserve does.

“We don’t care that much when the Fed cuts. We care more about our data. We follow the Fed very closely and what they decide is one data point for us, one among many others,” Remolona said.

He also said it is highly unlikely for the BSP to consider another rate hike due to the peso depreciation against the dollar.

“Actually raising the policy rate would entail inflation expectations being anchored, (maybe) there we might consider raising. But as long as inflation expectations behave and the data going forward are similar to what has been happening, (it is) highly unlikely that we will tighten,” he said.

To tame inflation and stabilize the peso, the BSP Monetary Board raised key policy rates by 450 basis points between May 2022 and October 2023.

vuukle comment


  • Latest
  • Trending
Are you sure you want to log out?

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

Get Updated:

Signup for the News Round now

or sign in with