BSP again says no to deliberate weakening of the peso

6 November 2012

The Bangko Sentral ng Pilipinas, reiterating earlier statements it made in early October, again insisted it will not deliberately weaken the peso against the US dollar. Rather, the BSP would have the exchange rate determined by the market. The BSP explained that, while deliberately weakening the peso may benefit exporters, the same move could be disadvantageous to other sector. The clamor for the BSP to weaken the peso comes from export groups and some economists supporting the export sector. They said the appreciation of the peso so far this year has made Philippine-made goods more expensive in dollar terms and thus less competitive in the global market. They want the BSP to engage more heavily in dollar buying in the foreign exchange market so that the dollar will strengthen and the peso will weaken. BSP Governor Amando Tetangco Jr., however, said exporters should not rely on the exchange rate to remain competitive. “We [BSP] have maintained that external competitiveness is more than the exchange rate. It is principally increasing productivity and reducing cost,” Tetangco said. The BSP does not target a particular exchange rate but instead maintains a presence when the volatility is excessive, Tetangco said. A much earlier report from last October 8 said the BSP had stressed that it would not increase its dollar-buying activities just so the peso would become artificially weak. While a strong peso hurts exporters, it benefits importers. This is because a strong peso makes imported goods cheaper in local currency terms. And because it helps make imports, such as oil, cheaper, a strong peso likewise helps temper overall inflation in the country.

The peso, which lingers in the 41-to-a-dollar level, has strengthened against the US dollar by about 6 percent since the start of the year. — DVM, GMA News