BSP intervenes in forex market

MANILA, Philippines--The Bangko Sentral ng Pilipinas (BSP) has been intervening in the foreign exchange market in the past few days to prevent a sharp appreciation of the peso, making sure the increase in consumption is maintained to help prop up the economy.
This was according to market sources, who said that without the BSP intervention, the peso could have been much stronger than its closing values since last week.“Yes, the BSP has been intervening in the trading,” said one trader who asked not to be named.A market analyst, who also talked on condition of anonymity, said the central bank was avoiding a sharp appreciation of the peso to encourage households dependent on remittances from family members working overseas to spend more.“One-third of spending by Filipino households is supported by remittances. A weaker exchange rate will be beneficial to OFW families because this will increase their spending power,” the analyst said.Because of the lingering effects of the global turmoil, the Philippine economy needed to prop up consumption. One way to do so, he said, was to avoid having an exchange rate that would discourage families of overseas Filipino workers from spending.The peso on Tuesday closed at 46.475 against the dollar, up 16 centavos from the previous day’s finish of 46.63.The peso last week touched 46.46 against the greenback, its highest level for the year, on the back of rising dollar inflows.The BSP said the dollar inflows were in the form of foreign portfolio investments, which have started to increase following reports that the global economy was starting to recover from the worst of the crisis.BSP Governor Amando Tetangco Jr. said the peso might continue to strengthen due to remittances inflows, which continued to grow even at the peak of the global crisis.“Investors are regaining their risk appetite because of talks about recovery, and emerging markets like the Philippines will benefit from higher investment inflows,” Tetangco said.The BSP chief said the Philippines was experiencing rising foreign exchange inflows as proven by the appreciation of the local currency.
Monetary officials, however, would not admit whether the BSP actually intervened in the foreign exchange market yesterday. Nonetheless, they said it was the BSP’s policy to allow a market-determined exchange rate. But it will intervene in the market to avoid sharp and sudden appreciation or depreciation of the local currency.