BSP: Peso volatility continues to be minimal

MANILA, Philippines – Despite the gyrations in the peso-dollar exchange rate, central bank officials said they are not worried about the depreciation of the peso against the dollar because volatility levels remained tame.

The Bangko Sentral ng Pilipinas (BSP) said that despite the occasional swings, the market-determined exchange rate still worked as an efficient mechanism for allocating resources.

As long as the BSP could keep volatility within manageable levels, officials said the peso remained well within the range of regional currencies where economies were going through the same grinder as the Philippines.

BSP Managing Director Cyd Amador said yesterday that the BSP is still intent on moderating sharp fluctuations in the exchange rate in order to prevent spill-over effects on the inflation rate.

“Because the volatility of the peso continues to be minimal, it’s not worrisome,” Amador said.

Although the slowdown in the economy could affect external price competitiveness, Amador said the impact was not so great since the movement of the peso was still in tandem with the movement of other regional currencies.

“In terms of external price competitiveness, basically we are able to maintain it,” she said.

However, Amador pointed out that during times of economic difficulty, the exchange rate could not be used as a determining factor for the strength of the country’s exports since market demand was the bigger factor to consider.

“It’s really the demand that will determine export performance and that demand will be dependent on the strength of economic growth in the advanced economies,” Amador said.

Amador said the government is not expecting a major reversal in export markets although demand could improve in the second half of 2009, close to the end of the year.

Amador said this recovery, however, could not be felt until two quarters after, when demand pick-up in major economies have had time to be translated into higher consumer spending for products that countries like the Philippines would normally export.

Philstar

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