Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said Monday the regulator will not allow the exaggerated decline of the peso against the US dollar for the benefit of currency speculators.
“Speculators may want to take advantage by exaggerating for financial gain an otherwise healthy price correction to recover some of the price competitiveness,” Espenilla told reporters Monday.
“The BSP will not tolerate such speculative behavior and stands ready to use its very ample international reserves and deploy its full policy and regulatory arsenal if necessary,” Espenilla said.
He said Bangko Sentral was very mindful that the adjustment of the peso against the greenback might create market uncertainty if not well explained “so we communicate and explain.”
He said the peso had sufficiently adjusted and could be expected to regain relative stability in the coming days.
“This soft landing is reinforced by effective discipline in fiscal management and a well-designed and well-executed public investment program,” he said.
The peso was on a sustained decline against the dollar in the past few days, dragged down by external developments particularly the recent tension between the United States and North Korea and the terrorist attacks in Barcelona, Spain.
The peso sank to an 11-year low of 51.49 against the greenback Friday. It was the local currency’s weakest level since it settled at 51.60 a dollar on Aug. 24, 2006.
“Some commentators of late would have us judge negatively the state of the Philippine economy merely on the basis of the depreciating trend of the peso against the US dollar. In particular, the peso is compared in unfavorable light against ‘stronger’ regional currencies. That is a rather simplistic way to look at it,” Espenilla said.
He said the better way to gauge the economy was to evaluate its progress toward delivering on things that ultimately matter to the people, such as low inflation, growth and jobs.
He also said that each economy faces its own unique challenges and should therefore be deliberately implementing policies that suit its circumstances and needs.
Espenilla said the Philippines was doing the correct thing in prioritizing a more investment-led economic growth. He said allowing the peso to depreciate gradually to a more appropriate level was fully consistent with that strategy.
“Pursuing a flexible and adaptive exchange rate policy enables the BSP to keep its interest rate policy settings squarely focused on achieving the inflation target while dampening consumption and
supporting a more investment- and export-led growth that the economy needs to sustain its strong momentum over the long haul,” he said.