The country’s big banks on Wednesday, Oct. 12, assured markets they are closely working with regulators for the “orderly, fair and transparent” foreign exchange (FX) transactions as the peso nears P60 to the US dollar.
Bankers Association of the Philippines (BAP) President Antonio C. Moncupa, who is also the CEO of East West Banking Corp., said banks will continue to maintain the “orderly functioning” of the FX as well as the fixed-income markets.
“In order to be part of the solution, the banking industry continues to work closely with the BSP (Bangko Sentral ng Pilipinas) for orderly, fair, and transparent markets minus the unproductive activities that only hurt the public,” said Moncupa.
The BAP, who runs the FX daily spot market, said they support BSP’s transparent price discovery and measures against speculative activities “that tend to distort market prices and hurt the economy.”
“With global headwinds adversely affecting inflation and foreign exchange rates across the world, the BAP joins national efforts to minimize its impact on our people by avoiding activities that can only worsen the situation,” said Moncupa.
The peso vis-à-vis the US dollar closed stronger on Tuesday at P58.865. On Wednesday intraday, the peso depreciated to P58.999. It first breached the P59 level on Oct. 3 and then again last Monday, Oct. 10.
Banks and FX traders have been predicting the peso breaking past P59 to P59.50 and then P60 in the near term.
Last week, the BSP called on banks to not engage in currency speculation as the BSP contains exchange rate pressures.
In a rare statement, the BSP assured markets that it will “manage” any disruption in the FX environment and financial sector in general, and that it will continue to service all legitimate US dollar transactions.
The BSP also reminded the public that there are “many reasons” for the peso depreciation and that the local currency’s movements is similar with other currencies in the region and outside of Asia.
As a free-floating exchange rate system, the BSP’s exchange rate policy is dictated by the supply and demand of foreign exchange. However its intervention role is limited only to smoothening sharp fluctuations and if there are excessive peso movements.