Tuesday, 30 November 2010

BSP eases fears on peso volatility

Business Mirror

THE Philippine peso is not remarkably more volatile than most other currencies in the region despite the surge in foreign funds from developed economies to emerging markets like the Philippines, the Bangko Sentral ng Pilipinas (BSP) said on Monday.

In a text message, BSP Governor Amando M. Tetangco Jr. said the flow of foreign funds from one market to the other in recent months has rendered recipient market currencies vulnerable to exchange-rate fluctuations as these global fund flows rise and ebb with time.

But he said while the Philippines plays host to some of these global fund flows, the local currency, the peso, has proven more stable than most in the region.

He said the peso averaged P44.18 per US dollar as of the last trading day on November 26, or an appreciation or gain averaging only 5.1 percent from year to date.

The Thai baht, in contrast, has proven more volatile than the local unit as it posted a year-to-date appreciation of 11.1 percent.

The Japanese yen also appreciated by 9.9 percent, the Singaporean dollar by 7.6 percent and the Australian dollar by 9.2 percent.

The Indonesian rupiah also gained on the dollar by 5.5 percent, the Indian rupee by 3.7 percent, the Korean won by 2.2 percent and the Chinese yuan by 2.7 percent.

This means Philippine exporters were slightly more competitive than their Indonesian counterparts and in no danger of losing markets to exporters based in Jakarta.

Philippine exporters were even more competitive than Taiwan’s exporters as the Taiwanese dollar appreciated at a higher rate of 5.9 percent.

Only the Korean won and the Indian rupee showed less volatility than the Philippine peso as their currencies appreciated by only 2.2 percent and 3.7 percent, respectively.

But Tetangco said while the ebb and flow of US dollars has a telling effect on currencies around the region, such effects “could be more or less short-term factors.”

What counts more are long-term factors that affect the performance of the economy in terms of growth and, of course, its macroeconomic condition, he said.

“But if you have a good macro economy, the tendency is for the local currency to appreciate,” Tetangco said.

The country’s growth-positive macroeconomic underpinnings include the high level of gross international reserves totaling $56.8 billion, and expectations of a huge surplus in the balance of payments seen hitting $8.2 billion by the end of the year.

With nine-month overseas remittances already at $13.8 billion, the country’s external sector was expected to end the year on even stronger footing, according to Tetangco.

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