Peso hits 6-year high at 46.75

With the peso continuing its rise against the US dollar, the government has started to take action to protect the small and medium-sized exporters.

Trade Secretary Peter Favila, in an interview with reporters at Malacañang yesterday, said he has presented to President Arroyo a number of “interim measures” aimed at protecting the small and medium-scale exporters from the peso appreciation.

Favila said the recommendations were presented to the President during a meeting last Saturday where the primary issue of discussion was the behavior of exchange rates in the region.

As anticipated, the appreciation of the Chinese renminbi has affected the currencies in the region, including the peso which hit a six and-a-half year high of 46.31 against the dollar at the close of trading yesterday.

“We continue to look for ways and means to mitigate this especially for the exporters, not the big ones, since they are telling me, especially those with high local content, it’s (impact) neutral to them,” Favila said.

Favila pointed out that the interim measures were conceptualized in consultation with the exporters, whom he met last Friday night.

He hinted that the government would be doing something about the cost of power, which he said is the primary concern of the exporters.

“We’re doing something about it,” Favila said but declined to disclose details as Energy Secretary Raphael Lotilla is still finalizing the mechanics.

“We’re continuously looking at other costs that we could probably eliminate so that the exporters could temporarily recover from all of this (currency fluctuation),” he added.

Favila said he is also consulting with Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. as well as Development Bank of the Philippines (DBP) president and chief executive officer Reynaldo David to come up with some measures to assist the exporters.

According to Favila, he has proposed offering a special hedging facility for the exporters and the government financial institutions such as the DBP would be tapped to manage this.

Hedge funds are considered less risky and volatile as they utilize a variety of financial instruments and offers the investor the possibility of high returns.

“I was telling the President probably the best vehicle to use for this is the GFI because the private banks themselves, they have their own problems to address insofar as the currency behavior is concerned,” Favila said.