BSP: Strong peso still competitive

Posted at 01/02/13 8:03 AM

The local currency the peso remained very competitive in 2012 no matter that its value had strengthened to a five-year high averaging P41.078 per dollar at the local currencies market, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said on Tuesday.

When viewed against the movement of currencies among emerging market peers, Tetangco noted that the peso’s 6.8-percent appreciation in 2012 was just at the spot and not too rapid on either side of the scale as to be volatile or unpredictable.

This was important in that business people counted on a currency that was predictable and not prone to wild swings from one side of the exchange spectrum to the other.

“The peso proved stable and remained competitive throughout 2012. While it gained strength, so did most currencies in the region,” he said.

Currencies trading resume today, Wednesday, at the Philippine Dealing and Exchange Corp. (Pdex), where the local unit closed 7.5 centavos higher to P41.05 per dollar at the final day of trading on December 28, 2012.

Tetangco cited the 6.81-percent appreciation of the New Zealand dollar, the similar 7.17-percent strengthening of the Turkish lira, the 7.78-percent rise in the value of the Taiwanese dollar and the 6.51-percent appreciation of the Singaporean dollar.

Also notable gainers were the Malaysian rupiah, which gained 3.77 percent versus the US dollar; the 3.66-percent appreciation of the Thai baht; the 2.91-percent jump of the Australian dollar; the 1.41-percent gain made by the Chinese yuan or renminbi; and even the 4.14-percent appreciation of the British pound/sterling.

Data supplied by Tetangco also showed the Indonesian rupiah weakening by 2.71 percent, the Indian rupee by 5.29 percent, the Brazilian real by 8.24 percent and the Japanese yen by 10 percent, making it relatively harder for the export sectors of these countries to trade with the rest of the world.

In terms of volatility or swings from one end of the exchange rate to another, the Philippine peso’s performance was adjudged middle of the road.

Tetangco said that the peso’s volatility averaged only 1.94 percent, lower than the South Korean won’s 2.34 percent, the New Zealand dollar’s 2.55 percent, the Australian dollar’s 2.21 percent, the Swiss franc’s 2.42 percent, the euro’s 2.55 percent, the Indonesian rupiah’s 2.44 percent and the Japanese yen’s 2.56 percent.

Worse off were the currencies of India that gyrated at an average of 4.24 percent and Brazil’s at 6.38-percent average.

Market analysts and traders previously tied the peso’s strength to the continued improvement of its macroeconomic underpinnings, including a strong likelihood of a credit-rating upgrade soon.

Jonas Ravelas, chief market strategist at the nation’s largest lender, Banco de Oro Universal Bank, said the speed of the peso’s appreciation was gradual and in step with the volume of trade involved.

Some have also noted that the peso’s 2012 performance, outdone only by the South Korean won, was fueled in part by accelerating local output averaging 7.1 percent in the third quarter.

The peso’s sustained strength helped convinced the policy-making Monetary Board to increase the capital charge on the banks’ non-deliverable forwards while capping the same to no more than 20 percent of capital for local banks and 100 percent for foreign banks.

The BSP has banned foreign entities from participating at its special deposit window, a mechanism that helps the central bank manage the level of peso liquidity in the financial system.