The Philippines Says It Is Willing To Change Currency Rules To Protect The Peso

The Philippine central bank said it may tweak foreign-exchange policy to assist reduce speculation, emphasizing its preparedness to react to inflationary dangers despite the peso's recent gains.

Dollar purchases thought to be “speculative,” or those without underlying client transactions, have surged and are putting pressure on the peso, according to the Bangko Sentral ng Pilipinas in an email on Friday. It replied to inquiries submitted on October 17, when the peso hit a new low of 59 pesos to the dollar.

The BSP said, “As an inflation-targeting central bank, the BSP will continue to react to currency rate fluctuations to the extent that they influence or constitute a danger to the inflation forecast.”

The BSP said that policies such as foreign-exchange position limitations and risk weights for non-deliverable futures are in place to prevent risk-taking behavior. These “may be changed countercyclically to avoid financial imbalances.”

Currently, a bank's consolidated net open foreign currency position cannot exceed 25% of its qualifying capital or $150 million, whichever is less.

The Philippine peso, Southeast Asia's poorest performer this year, climbed 0.2% versus the dollar at 2:30 p.m. local time to 57.27 after the BSP's previously announced 75-basis-point key rate rise on Thursday. This quarter, the currency recovered more than 2%, reversing the year's losses.

The BSP also said that it employs moral suasion to reduce speculation and lately “encouraged banks to cooperate” to assist maintain the currency market “orderly.”

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