BSP ready to use tools to support PHP

  • The Bangko Sentral ng Pilipinas (BSP) is prepared to use other tools to manage the PHP’s volatility, which is contributing to inflation.
  • BSP Senior Assistant Governor Iluminada T. Sicat said the central bank’s approach “has been to smooth out excess daily volatility rather than defend a specific level or trend of the PHP.”
  • The local unit closed at PHP58.94 per USD on 20 Oct 22, barely changed from its PHP58.945 finish on 19 Oct 22, based on Bankers Association of the Philippines data. It has weakened so far by 15.56% or PHP7.94 from its PHP51 close on 31Dec 21
  • “The BSP responded by raising interest rates aggressively while also participating in the foreign exchange market, although at a lesser extent than some of the major economies,” Ms. Sicat said during a Senate hearing on 19 Oct 22.
  • Ms. Sicat identified the BSP’s liquidity-enhancing and management tools such as the USD repo facility, the exporters’ USD and JPY rediscount facility, and the enhanced currency rate risk protection program.
  • The BSP also has a bilateral swap arrangement with the Bank of Japan, and is part of the Association of Southeast Asian Nations (ASEAN) Swap Arrangement for USD2-bn short foreign exchange liquidity support.
  • “Looking ahead, the PHP is expected to be supported by sustained foreign exchange inflows that could help counterbalance the pressures on the currency,” Ms. Sicat said, citing gross international reserves, remittances and foreign direct investments.

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