Bangko Sentral ng Pilipinas Gov. Amando
Tetangco Jr. yesterday said he is comfortable with the 42-43
pesos to the dollar rate.
He said the BSP does not have a strong peso
policy but that it lets the market decide the rate.
The peso yesterday closed at 42.615 to the US
dollar after hitting a low of 42.675. The total value of
transactions at the Philippine Dealing System reached $555
million.
He said that while a strong peso helps in
tempering the rise in prices,
there is no deliberate effort to support the
currency.
"By implication, we don’t really use the
exchange rate to manage inflation, although a stronger peso
helped temper inflation in 2007," he said.
The peso has fallen back to the 42 levels
after improving to up to 41 to the dollar early this year, to
what monetary authorities said can be attributed to rising risk
aversion that is cutting inflows to emerging markets.
Tetangco said the BSP’s policy remains to
keep off the market and intervene only to moderate sharp
fluctuations.
Last year, the country posted an inflation of
2.7 percent, the lowest in more than two decades, helped in part
by the nearly 19 percent appreciation of the peso.
The country registered double-digit growths
in inflows last year and the BSP had to resort to sterilization
to keep the currency from appreciating too much.
That had the incidental effect of boosting
the country’s gross dollar reserves, which stood at
record-levels last year.
However, the dollar buying resulted in record
forex losses of P113.7 billion.
Meanwhile, inflation climbed to a three-year
high of 8.3 percent in April, completely reversing the trend
last year, on skyrocketing prices of oil and food.
Monetary officials said despite the external
volatilities, the peso should remain broadly stable this year
and help them manage inflation.
In fact, a weakening currency may be good for
the BSP if the bottomlines would be the primary consideration.
Nonetheless, monetary authorities said at
42-43, the peso should still be okay and relatively useful in
managing inflation.
