Peso to trade in a tight, stable range — Bangko Sentral

The peso will trade in a tight range this year, the Bangko Sentral ng Pilipinas said Friday, noting a confluence of developments will influence the Philippine unit's exchange rate.

 

"We see the peso trading within a narrower range this year compared to last year," Bangko Sentral Assistant Governor Cyd Tuaño-Amador told reporters at the sidelines of the central bank's quarterly briefing on inflation. 

 

For one, a "higher import growth at around 11 percent in 2013 from some 1 percent last year" will tighten the peso's trading range, Tuaño-Amador noted.

 

Volatility on the exchange rate, Amador noted, will also be tempered on the back of better economic outlook in the US resulting in the ouflow of speculative investments. "Should the green shoot off, the US economy bears fruit, funds will go back to them," she said. 

 

A trader, who asked not to be named, however, took a different position. "It's too early to tell. Generally, global recovery is very fragile at the moment," the trader noted.

 

"Funds will definitely come and go depending on economic data releases here and overseas," he added.

 

Foreign portfolio investments—also known as hot money given the ease with which these can be taken in and out of an economy—expanded by 52.49 percent to register a net inflow of $212.65 million in December versus $139.45 million a year earlier, latest Bangko Sentral data showed. 

 

Speculative inflows—which poured into the country due to prospects of better returns—pose risks in terms of stirring exchange rate volatility that in turn pose a serious threat on industries that earn in dollars. It was cited as the strength of the peso which trade at 42:$1 dollar in early 2012 to around the 40.50:$1 level at the end of last year. 

 

"The BSP is very firm on keeping the volatility of the peso low,” the trader. “Investments inflows have been sterilized by the BSP through direct purchasing at the market and other macroprudential measures," he added.

 

Since it lowered key interest rates by 25 basis points to record lows of  3.5 percent for overnight borrowing and 5.5 percent for overnight lending last October, the central bank has used macroprudential tools in managing capital flows. — VS, GMA News