The Philippine central bank said it can adjust foreign-exchange policies to help curb speculation, highlighting readiness to respond to inflation threats even as the peso has pared losses recently.
Dollar purchases believed to be “speculative,” or those without underlying client transactions, were observed to have increased and were adding pressure on the peso, Bangko Sentral ng Pilipinas (BSP) said in an e-mail on Friday. It responded to questions sent October 17 when the peso hit anew a record-low 59 per dollar.
“As an inflation-targeting central bank, the BSP will continue to respond to exchange rate movements to the extent that they affect or pose risk to the inflation outlook,” BSP said.
Policies including foreign-exchange position limits and risk weights for non-deliverable forwards are in place to contain risk-taking behavior, BSP said. These “can be adjusted in a countercyclical manner to prevent financial imbalances.”
Currently, a bank’s consolidated net open foreign exchange position is capped at 25 percent of its qualifying capital or $150 million, whichever is lower.
The Philippine peso, Southeast Asia’s worst performer this year, rose 0.2 percent against the dollar at 2:30 p.m. local time to 57.27 after BSP delivered a previously announced 75-basis-point key rate increase on Thursday. The currency has gained more than 2 percent this quarter, paring this year’s losses.
BSP said it also uses moral suasion to tamp down speculation, and recently “encouraged banks to collaborate” to help keep the currency market’s “orderly functioning.”
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