Manila: The Philippine central bank is monitoring currency transactions for potential speculation as part of its efforts to mitigate the peso’s volatility, Finance Secretary Benjamin Diokno said.
“The central bank has initiated actions to moderate sudden movements in the peso, including participation in the foreign-exchange market as well as looking into possible cases of speculative activities,” said Diokno, who sits on the monetary authority’s board.
Policy makers encourage the use of the formal market for currency transactions, he said during a live-streamed speech Friday in Washington, D.C. The bank will take steps to manage any financial-market disruption, he said.
The comments came after the Philippine peso returned to its all-time low of 59 per dollar this week. The vast majority of currencies around the world have slumped versus the greenback this year as the Federal Reserve raises interest rates to contain inflation, but the peso’s drop of more than 13 per cent is one of the steepest declines among major Asian currencies.
A weakening currency stokes import costs and adds pressure to inflation already hovering above the central bank’s target of 2 per cent to 4 per cent.
Bangko Sentral “will take all necessary measures including raising interest rates,” Governor Felipe Medalla said at the same event. The central bank has also sold dollar reserves, he said, in addition to raising rates by a total of 225 basis points so far this year.
Medalla earlier flagged a rate rise of as much as 75 basis points next month, after data released Thursday showed core US inflation hit a four-decade high.
The Philippine economy is “strong enough to withstand” rate increases, the governor said at the live-streamed briefing, citing calculations that a 25 basis-point hike would only cut output growth by about five basis points.