Firms urged to buy $ from legit sources

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is urging companies to source their dollar requirements from legitimate sources, in a move to mitigate speculative moves, so as not to add volatility to the foreign exchange market.

In a statement, the BSP said monetary authorities are taking steps to manage any disruption in the financial market brought about by the continued strengthening of the greenback against major currencies including the peso.

The BSP said it looks forward to servicing all legitimate dollar transactions.

“The US dollar spot market remains open and active while forwards and repos are available facilities. All of these can move the economy forward by supporting the financial leg underpinning economic activity and allowing for an orderly settlement of USD obligations. This puts the Filipino in a better position,” the BSP said.

It said the regulator is committed to enhancing the well-being of Filipinos through a financial system that addresses the funding needs of the public while managing risks.

“The BSP is taking steps to manage any disruption in our financial market. We ask those who have the means not to take undue advantage of changing market conditions. This does not help the Philippine peso; it does not help the Philippines. What we can do is to bring all transactions into an organized and accessible formal market that offers consumer protection,” the BSP said.

The peso depreciated by 15.7 percent to hit an all-time low of 59 to $1 on Monday from the end-2021 level of 50.999, making it one of the worst performing currencies in the region.

“There are many reasons why financial markets worldwide have been experiencing notable changes thus far in 2022. Among the pronounced developments is a strong dollar, which is causing currencies like the Philippine peso to depreciate,” the BSP said.

The central bank pointed out that market conditions around the world are challenging.

“Working together allows us to sustain our functioning financial market while appropriately managing the developing risks,” it said.

BSP Governor Felipe Medalla earlier said in an interview with Bloomberg Television that the central bank would be more active in the foreign exchange market to smoothen the volatility of the peso against the dollar.

Market intervention has brought the country’s gross international reserves (GIR) level to below $100 billion.

ING Bank senior economist Nicholas Mapa said the Philippine central bank recognizes the importance of legitimate transactions for commerce as this would spur economic growth.

“What they are hoping to minimize and mitigate are speculative moves, which tend to drive undue pressure and panic in the spot market,” Mapa said.

Albay Rep. Joey Salceda, chairman of the House committee on ways and means, earlier said he expected the peso to depreciate further to a range of 65 to 68 per $1.

“There is no resistance. There is no anchor, so to speak. So I can see the dollar sustaining its strength against the peso. It will continue,” Salceda said.

An economist said the BSP is now deploying open mouth operations as the peso continued to weaken against the dollar despite the bank’s intervention in the foreign exchange market.

The economist pointed out that the monetary authorities are using moral suasion to try to convince market participants to behave properly.

“The central bank is using moral suasion to influence public sentiment into believing that they are still in control and ready to act if needed,” the economist said.

The peso gained 35 centavos to close at 58.65 to $1 from Monday’s record low of 59 to $1. It opened stronger at 58.88 and hit an intraday low of 58.98. Trading volume increased by 16.8 percent to $779.1 million from $666.7 million last Monday.