BSP says market intervention only comes in ‘crazy’ forex swings

PANGLAO, Bohol — The Bangko Sentral ng Pilipinas (BSP) on Monday said it only steps in to help manage the peso-dollar exchange rate when trading becomes unusually unstable or “crazy,” stressing that it does not aim for any specific peso value.

“We’re kind of shy about intervening, but if we do decide to intervene, we’re more likely to do it when the market is going crazy, believes in some superstition, [or] believes in some technical analysis,” BSP Governor Eli Remolona Jr. told reporters during a press conference on the sidelines of the Central Banking Symposium.

“In general, we want the movements to be smooth in the direction of what fundamentals they should go,” he added.

The Philippine peso weakened by 1.5 centavos to close Monday at P58.87:$1 from Friday’s P58.855:$1. It touched an intraday low of P58.83:$1 and an intraday high of P59.02:$1.

The local currency hit an all-time low of P59.17:$1 on November 12, surpassing the previous record of P59.13:$1 set on October 28.

Remolona said exchange rate pass-through is most strongly felt in oil prices.

“The exchange rate pass-through mainly goes to the price of oil, but it also goes to other important commodities; I would say the biggest factor is the price of oil (since) the price of oil is in US dollars,” he said.

“If the price of oil goes up in the global market, and then it’s compounded by an exchange rate depreciation, then the price of oil in pesos goes up even more. So that’s the pass-through. It happens especially with oil, but also with rice and other important commodities,” he added.—MCG, GMA Integrated News