MANILA, Philippines — The daily intervention of the Bangko Sentral ng Pilipinas (BSP) in the foreign exchange market has fueled the strengthening of the peso over the past trading days after hitting a new all-time low of 59 to $1 several times this month.
According to BSP Governor Felipe Medalla, the central bank has enough buffer to intervene in the foreign exchange market to stabilize the peso.
The intervention in the foreign exchange market, Medalla said, is affordable, as it is well within the country’s gross international reserves (GIR).
However, the country’s GIR level has narrowed to $93 billion as of end-September from $97.4 billion in end-August. Still, the forex reserves represent a more than adequate external liquidity buffer equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income, and is about 6.6 times the country’s short-term external debt based on original maturity.
“Our reserves remain more than adequate and they remain so,” Medalla said.
When asked how much the central bank has spent to intervene in the market, the BSP chief admitted the amount has been significant, but he refused to disclose how much.
“We’re always there. I think we’re almost there every day. I cannot remember a day we didn’t participate,” Medalla said.
After depreciating by 15.7 percent to close at a record low of 59 to $1 on Oct. 3, 10 and 13 from the end-2021 level of 50.999 to $1, the local currency has appreciated by 1.3 percent to close at 58.22 yesterday. It gained 21 centavos from Wednesday’s close of 58.43 to $1.
“We’re confident that we have sufficient capacity and we’re not foolish enough to waste our reserves if it (peso) cannot be defended. When we use our reserves it is because we think it works,” Medalla said.
Earlier, the Bankers Association of the Philippines (BAP) vowed to work against speculative activities in the foreign exchange market that tend to distort prices and hurt the Philippine economy.
BAP president Antonio Moncupa Jr. said the organization remains committed to help maintain the orderly functioning of the fixed-income and foreign exchange markets.
“With global headwinds adversely affecting inflation and foreign exchange rates across the world, the BAP joins national efforts to minimize its impact on our people by avoiding activities that can only worsen the situation,” Moncupa said.
Moncupa, who is also vice chairman of Gotianun-led East West Banking Corp., said the BAP supports the initiatives of the BSP by maintaining orderly financial markets.
“We appreciate and support the policy initiatives of the BSP towards liberalization and transparent price discovery — including the conduct of its supervisory mandate that ensures orderly markets. Together, we will work against speculative activities that tend to distort market prices and hurt the economy,” he said.