The Philippines: BSP says peso’s weakness ‘not a concern at the moment’

  • The Bangko Sentral ng Pilipinas is not worried about the current weakness of the peso, adding it is ready to step in to tame any sharp depreciation of the local currency.
  • BSP Governor Benjamin Diokno said the central bank is already intervening in the foreign exchange market to temper the local unit’s weakness by converting some of its dollar reserves into peso. But the BSP chief said monetary authorities still trust in the market-determined exchange rate.
  • The peso on 9 Jul 21 breached the P50-level for the first time in over a year to close at PHP50.08 versus the US dollar, its weakest performance since it finished at PHP50.19 per dollar on 23 Jun 20. The peso opened the trading week at PHP50.05 against the greenback and is moving sideways in the morning.
  • “Our role is smoothen the fluctuations, and to make sure market conditions are orderly rather than steering peso to a particular level, whether it’s stronger or weaker than other currencies,” he added.
  • As pandemic curbs further ease, importers are exchanging more pesos for dollars to ship in more goods to meet a slow pick-up in consumer demand, thereby weighing on the local currency. A rallying dollar due to hawkish signals from the US Federal Reserve of a sooner-than-expected rate hike is adding pressure to the peso.
  • But so far, Diokno is unfazed, arguing that the country still has “hefty” dollar reserves and that the seasonal uptick in remittances from Filipino migrants in the fourth quarter could buoy the peso. The BSP boss also said the Philippines can withstand the expected capital outflows once the Fed begins its tightening moves.
  • “I’m not worried about the Fed interest rates going up, that will cause a lot of problems for other emerging economies. But not for the Philippines,” he said.

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