There may be a need for stricter measures discouraging banks from speculating in the currency market after the peso touched a four-year high this week, the Bangko Sentral ng Pilipinas said Wednesday.

 

Bangko Sentral is now looking into the rules on currency futures trading to see if existing regulations should be tightened, BSP Gov. Amando Tetangco Jr. told reporters.

 

He specifically cited non-deliverable forwards of NDFs, a hedging instrument for buying currency at a specified exchange rate and time in the future to help businesses – particularly importers – minimize losses from wild fluctuations in the exchange rate.

 

Bangko Sentral is suspicious that banks are trading in NDFs for gains in speculating on the peso and not for hedging against changes in foreign exchange rates in favor of their clients.

 

“We are monitoring price action and market behavior to determine unusual activity,” Tetangco said.

 

“We have to see if additional measures are needed to make sure that foreign exchange transactions are conducted basically to meet legitimate requirements,” the central bank chief added.

 

Bangko Sentral discourages currency speculation which causes volatility and disrupts the economy.

 

The peso weakened to P41.83 against the US dollar on Wednesday from Tuesday’s four-year high of 41.72:$1, according to the Philippine Dealing and Exchange Corp. — VS, GMA News