THE Bangko Sentral ng Pilipinas (BSP) signaled on Friday it does not relish the prospect of a strong peso and hinted at quick jabs in and out of the foreign-exchange market now and then to ensure the value of the local unit does not go out of hand.

The peso’s value already rose by 1.2 percent from year to date, and prospects of further appreciation are virtually assured by improvements in the global investment climate and the promise of still more foreign inflows arising from public-sector-loan activities.

To BSP Governor Amando Tetangco Jr., this spells trouble down the line if he and six other members of the policymaking Monetary Board were less than “circumspect.”

“The surge in foreign inflows will tend to increase the value of the currency and lead to an appreciation, and that may not be what we want to have,” he said on Friday at the 18th Annual Business Journalism Awards jointly sponsored by Globe Telecommunications and the Economic Journalists Association of the Philippines (Ejap).

“We’re trying to promote exports to boost the economy, that’s number one,” he said of a sector still in deep trouble, having contracted by 21 percent in August from a deeper slump of 25.4 percent in July.

Exports were seen to fall as much as 20 percent this year, per BSP readings.

Employers Confederation of the Philippines (Ecop) president Sergio Ortiz-Luiz Jr., a tireless exports advocate, was also at the same Ejap event as guest on Friday night.

According to Tetangco, this year is going to be a different year in terms of portfolio-fund flows, more known as “hot” or speculative money among central bankers.

Portfolio flows, and their impact on exporter behavior in the country, tend to complicate even the most carefully calibrated policy responses adopted by the BSP.

While some $1.78 billion fled the country on net basis last year, foreign fund managers were to cast their lot again with emerging markets as the Philippines and make monetary management more challenging, Tetangco said.

Risks attendant to surging foreign inflows are part of the triad of events seen working to push local output or the gross domestic product higher, but at some cost to the stability of prices, he added.

“The third risk could come from cross-border capital flows. This took a major hit over the past year but is expected to regain strength this year. A persistent surge in capital inflows could pose additional challenges to monetary policy,” he said.

This flags the return of foreign funds that left emerging markets coping with the after-effects of the global financial storm that started more than one-and-a-half years ago and a much-stronger peso versus the US dollar in the months while such flows remain significant.

As of October 3, hot money flowed inward on net basis totaling $227.29 million, a reversal from year-ago outflows of $855.13 million.

To moderate the peso’s anticipated rise, Tetangco said they will “participate in the market by buying dollars,” in the same manner that other central banks do for similar policy objectives.

But he gave assurances that while their presence may be felt at the market from time to time, the exchange rate of the peso relative to the US dollar will continue to be determined largely by market forces.

“A central bank can of course participate in the forex market by buying dollars, and by [such] domestic liquidity is released to the system. If the amount of liquidity is excessive, then clearly this might create inflationary pressures. But the level of liquidity in our country remains appropriate given that the inflation outlook remains favorable,” Tetangco said.

Inflation, he said, remains well within target range, having averaged only 0.7 percent in September after having dropped to a 20-year low of 0.1 percent in August.