BSP seen to stop peso slide before it hits 46/$1 territory

Posted at 01/28/2014 7:44 AM

MANILA - A respected banker has expressed the view that the Bangko Sentral ng Pilipinas (BSP) would not allow the peso to slide down the 46/$1 territory, as such a development “would not be healthy” for the Philippine economy.

“Remember, the BSP has been recapitalized so it also has tools to help defend the peso, which is also good for us,” Banco de Oro (BDO) Capital & Investment Corp. President Eduardo V. Francisco said at the sidelines of Oxford Business Group’s launching of its full-year comprehensive report on the Philippine economy.

“I’m just relying also on the signal of the BSP; they have several measures as Governor [Amando M.] Tetangco and the rest of the directors were quoted as having said. I think they have measures and they will find a way, at least, to keep [the peso] stable at the 45 level,” Francisco said.

The dollar has been dominating the local currency for about a month now, as the peso continues its slide in value that started early December 2013 when the series of data pointing to a clearer recovery of the United States came out. This was followed by the Federal Reserve’s decision to taper its $85-billion asset-purchase program down to $75 billion monthly, causing investors to stay away from emerging markets and go back to the US.

On Wednesday the peso dipped to another three-year-low at 45.37/$1. This was the lowest that the local currency has dived since August 31, 2010, when it also fell to 45.37 to a dollar. Wednesday’s close was also 6 centavos weaker than the previous day’s close of 45.31/$1. Total traded volume was slightly up on Wednesday from $720.2 million in the previous day to $721.9 million.

Francisco said a depreciated peso would imports much more expensive although it would help the business-process outsourcing. “But, of course, since we’re import dependent, if the peso becomes too weak it becomes more expensive for us.”

Francisco reiterated his view that the BSP will be there to curb the excess volatility seen in the foreign-exchange market, citing the recent completion of the central bank’s capital infusion from the government.

His forecast on the movement of the peso is that it would peak at the 45 level and then gradually go back to 44 to 43/$1territory by the end of the year.