BSP ready to ‘neutralize’ speculative peso trading

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By Melissa Luz T. Lopez,
Senior Reporter

THE Bangko Sentral ng Pilipinas (BSP) will not tolerate speculators who seek to make wide margins from excessive swings in peso trading, its chief said, noting that the central bank will stop such attempts.

“[T]he BSP stands ready to intervene and neutralize the activity of speculators so they don’t define the market. They can’t be allowed to distort price discovery in search of quick profits by promoting exaggerated price movements and instability,” BSP Governor Nestor A. Espenilla, Jr. said in a text message to reporters.

“We have resources and regulatory powers to back the talk. The BSP has both capacity and resolve to act.”

The central bank chief maintained that the regulator is ready to temper any sharp movements in the daily exchange rate, as he allayed fresh concerns over the peso-dollar dynamics.

Mr. Espenilla said the peso has depreciated by 2.8% versus the greenback year-to-date, which simply reflects the “dynamic price discovery process” amid developments in the financial markets.

The peso-dollar exchange rate movements come “on the back of strong and sustained imports growth as the economy hums along,” the central bank official said, alongside some adjustments in financial positions as market players anticipate higher interest rates in the United States and in other advanced economies.

“The exchange rate needs to adjust in search of equilibrium. At its current zone, the peso has achieved healthy correction based on prevailing economic fundamentals,” the BSP governor added.

The peso has averaged at P50.1324-per-dollar for the first eight months of the year according to central bank data, slightly higher than the P48-50 range assumed by the country’s economic managers back in May.

Finance Secretary Carlos G. Dominguez III has said that the economic team remains comfortable with the current exchange rate despite touching 11-year-lows as the local currency trades at the P51 level.

“What we are watching very carefully is the rate of change. If it goes from P51 to P53 in one day, then that’s worrisome… [W]e are watching it, but we are not panicking,” Mr. Dominguez told reporters.