Peso plunges to new low at 51.77:$1

BSP adopts tactical intervention

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) will pursue tactical intervention in the foreign exchange market as the peso slumped to its weakest level in more than 11 years, BSP Governor Nestor Espenilla Jr. said yesterday.

“All of the fears and uncertainties in the world are reflected in the day to day volatility of the exchange rate. We allow it to reflect that because that is the reality the economy operates under. The BSP does tactical intervention to minimize volatility,” he said.

The peso lost 23 centavos to close at an intraday low of 51.77 from Tuesday’s 51.54 to $1. This was the weakest level of the peso since it closed at 51.87 to $1 on July 25, 2006.

“Of late, the peso has been depreciating and I’d like to think moderately and gradually,” Espenilla said.

He said the peso is under pressure again because of the perception that US President Donald Trump is about to appoint an ‘anti-inflation hawk’ as the next chairman of the US Federal Reserve.

“My only point is that it is not a target for the BSP, but we believe that the peso is going to be generally stable over the medium term horizon,” Espenilla said.

The BSP chief pointed out that the depreciation of the peso is in the middle of the pack among Asian currencies over the past five years.

He said the Japanese yen, Indonesian rupiah and the Malaysian ringgit  are “more depreciated” than the Philippine peso over a five-year horizon.

“In fact if you look at a five-year horizon, five years back the peso is actually in the middle of the pack in terms of depreciation,” he said.

Espenilla said the country’s sound macroeconomic fundamentals would continue to shield the Philippines from external shocks.

“The Philippines today is a very different economy than the crisis economy in the 1980s where our reserves are negative if you include the liabilities of the BSP and we have no market access. In fact the Philippines was in a junk status for a long time,” he said.

Espenilla said the Philippines has enough buffer as the country’s gross international reserves stood at $81.35 billion in end-September, enough to cover nine months worth of imports of goods and services.

Likewise, the Philippines has received investment grade rating from S&P Global Ratings, Moody’s Investor Service and Fitch Ratings since 2013 and has become a net lender to the International Monetary Fund.