MANILA, Philippines – Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said the peso is not performing exceptionally worse than its regional peers and has actually begun to perform better at the end of the first semester.
Tetangco rarely reacts to movements in the foreign exchange rates but he took exceptions to reports that the peso was the worst-performing currency in Asia in the first quarter.
“The Philippine peso has been moving in tandem with the movements of most currencies in Asia,” Tetangco pointed out. “With the continuing risk aversion in the external markets, the peso has weakened by 1.6 percent on a year-to-date basis as of 29 June 2009.”
But Tetangco was quick to point out that the currency is actually performing better than some Asian currencies.
Tetangco cited data indicating that other currencies in the region have also depreciated against the dollar this year such as the Singapore dollar (1.8 percent), Malaysian ringgit (1.9 percent), South Korean won (two percent), and Japanese yen (5.1 percent).
Meanwhile, Tetangco admitted that the country’s two closest competitors have seen their currencies appreciate such as the Indonesian rupiah, the Thai baht and the Indian rupee which have strengthened from their levels at the start of the year.
“But the peso’s current value as well as its average value year-to-date remain within the DBCC’s assumed range of 46-49 per dollar for the year 2009,” Tetangco pointed out.
Tetangco said the BSP had no intentions of intervening in the peso-dollar exchange rate except to reduce volatility in either direction.
“The BSP will continue to monitor closely the evolving developments in monetary and foreign exchange conditions to enable it to take appropriate measures consistent with its primary mandate of promoting price stability under the inflation targeting framework,” he said.
“Under this framework, the BSP allows the peso’s value to be determined by market forces, with the BSP’s participation limited to ensuring orderly conditions in the foreign exchange market,” Tetangco added.
Despite the gyrations in the peso-dollar exchange rate, central bank officials said they were not worried about the depreciation of the Philippine currency because volatility levels remained tame.
The BSP said that despite the occasional swings, the market-determined exchange rate still worked as an efficient mechanism for allocating resources.
As long as the BSP could keep volatility within manageable levels, officials said the peso remained well within the range of regional currencies where economies are going through the same grinder as the Philippines.
Although the slowdown in the economy could affect external price competitiveness, the BSP said the impact was not so great since the movement of the peso was still in tandem with the movement of other regional currencies.
However, the BSP pointed out that during times of economic difficulty, the exchange rate could not be used as a determining factor for the strength of the country’s exports since market demand was the bigger factor to consider. –Des Ferriols, Philippine Star
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