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Philippine central bank says ready to intervene to curb FX speculation
[MANILA] The Philippine central bank on Monday warned traders that it would intervene in the currency market to curb any speculative activity, and said it expects the peso to stabilise following its sharp slide to 11-year lows.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla described the peso's weakness as a "healthy price correction," and emphasised that the central bank believes a bounce against the US dollar is on the cards.
"The BSP will not tolerate. ..speculative behaviour and stands ready to use its very ample international reserves and deploy its full policy and regulatory arsenal if necessary," Mr Espenilla told reporters. "In any case, we think that the peso has now sufficiently adjusted and can be expected to regain relative stability going forward," he added.
The Philippine peso hit a fresh 11-year low against the dollar on Friday, a day after the country reported that it clocked a forecast-topping 6.5 per cent growth in the second quarter to make it Asia's second fastest growing economy after China.
Financial markets were closed on Monday because of a public holiday.
A surge in the imports of capital goods - mostly infrastructure related - has pressured the peso as President Rodrigo Duterte's administration prepares for a six year, US$180 billion spending spree to modernise and build new airports, roads, railways and ports.
Strong imports have widened the country's trade deficit, prompting policymakers to pencil in a first full-year current account deficit for the Philippines in 15 years this year. "The Philippines is doing the correct thing in prioritising a more investment-led economic growth. Allowing the peso to depreciate gradually to a more appropriate level is fully consistent with that strategy," Mr Espenilla said.
The central bank has kept policy settings steady since a 25-basis-point hike in September 2014. It set the overnight borrowing rate to 3.0 per cent in June last year when it moved to an interest rate corridor framework to make policy transmission faster.
Mr Espenilla reiterated the central bank would continue to pursue a "flexible" and "adaptive" exchange rate policy so it can focus its monetary policy on managing inflation and boosting economic growth.