BSP chief weighs latest peso performance

MANILA – – Should Filipinos be worried about the current weakness of the peso against the US dollar?

Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. has the answer.

Espenilla says there was nothing to worry about the latest performance of the local currency.

“It’s actually just reflecting market conditions and underlying fundamentals. We’ve seen nothing particularly unusual about this, it’s the nature of the exchange rate to fluctuate,” he told reporters at the sidelines of the 14th BSP Stakeholders Awards in the central bank office in Manila.

While Philippine economic managers have set the government’s peso-US dollar assumption for 2017 between a range of 48 and 50, the local currency opened Tuesday at 50.75 and touched the 50.78-level against the greenback in the morning session.

This was a tad weaker than it’s 50.69 finish Monday and already below its 50.73 close on Sept.1, 2006.

Since the BSP has a market-determined exchange rate, the central bank joins the market to address extreme exchange rate volatility.

Espenilla said the BSP continued to manage excessive volatility, citing that “the approach of the BSP is to let the exchange rate reflect underlying market conditions.”

“What we look at isn’t much the exchange rate but the underlying conditions. Today, the underlying conditions are quite healthy, as a result prices reflect those condition,” he pointed out.

The central bank chief said BSP focuses on “keeping inflation low and banking system strong.”

“These are still existing today,” he said.

In the first half of the year, rate of price increases averaged at 3.1 percent, slightly above the mid-point of the government’s two to four percent target for 2017 to 2020.

Last June alone, inflation declined anew and ended at 2.8 percent from month-ago’s 3.1 percent.

Highest inflation, so far, this year is 3.4 percent, hit last March and April.

Monetary officials believe that inflation may still rise for the year and hit its highest in the third quarter.

With inflation remaining manageable, Espenilla said the latest weakness of the peso should not be focused on, especially its daily changes.

“There will be days that we are higher, there will be days that we are weakest. That is the nature of these prices so don’t look at it on a day-to-day basis,” he said, citing external factors as the main reasons for the current peso depreciation.

“We’ve said volatility is there because of policy uncertainties, political tensions so it’s very difficult to say what’s affecting it on a daily basis,” he pointed out.

Reports have said that peso was among the weakest in the region but Espenilla said, “we are not in a contest.”

“We are managing the economy that’s consistent with our economic fundamentals. What’s important is that the economy is growing very well, inflation is under control, (and) the financial system is safe,” he stressed.

And while some question the latest performance of the local currency, there are winners such as beneficiaries of Overseas Filipino Workers’ (OFW) remittances, he said.

“That’s why it’s a question of supply and demand balancing themselves and generating the prices. Surprise is a data for us, it is not a target for the BSP,” he added. Joann Santiago/