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BSP hints at further peso appreciation

Pressure from higher foreign investment inflow

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The Bangko Sentral ng Pilipinas said the peso would be allowed to strengthen some more this year if pressure would come from higher foreign direct investments.

The Bangko Sentral ng Pilipinas said the peso, the second-fastest appreciating Asian currency against the dollar last year, would be allowed to strengthen some more this year if pressure would come from higher foreign direct investments (FDIs).

BSP Governor Amando Tetangco Jr. said there indeed was a good chance for FDIs to start growing substantially this year given the improving outlook of businesses on the domestic economy.

With the positive impact of FDIs on job creation and the growth of the economy, the BSP finds it prudent to accommodate the effects of investment inflow on the exchange rate.

“It is imprudent to go against the fundamental trend so we would, as before, accommodate some peso appreciation,” Tetangco told reporters.

He stressed, however, that the BSP would not be tolerant of appreciation pressures resulting from the excessive inflow of foreign portfolio investments, or “hot money,” which are short-term and speculative in nature.

“But we would also continue to maintain a presence in the [foreign exchange] market to curb excessive volatility in the exchange rate. We are watchful of market conduct and will implement further macro-prudential measures, including refinements of those we have already put in place, to keep excessive volatility in market prices in check,” Tetangco also said.

Gross FDIs to the Philippines as of November last year amounted to $1.34 billion, up 6.8 percent from $1.26 billion. Net inflow of FDIs reached $1.13 billion, up by 32 percent from $853 million.

Officials attributed the higher FDIs to the country’s improving economic fundamentals, including faster economic growth, declining debt burden of the government and rising foreign-exchange reserves.

FDIs to the Philippines, however, remained anemic compared with the amounts cornered by neighboring countries.

Officials said the Philippines could get more FDIs starting this year, when the government and some economists from the private sector expect the country to finally get an investment grade credit-rating.

Tetangco said if such a positive outlook on FDIs would materialize, the BSP would allow its potential consequence of a further rise in the peso.

The peso closed at 41.05 against the dollar during the last trading day of 2012, appreciating by nearly 7 percent. This was the second-fastest rate of appreciation among Asian currencies and the fourth-fastest among all actively traded currencies in the world.


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  • keepthinking

    “hints”??

    nice ambiguous wording. :/

  • Hayek_sa_Maynila

    “It is imprudent to go against the fundamental trend so we would, as before, accommodate some peso appreciation,” 
    We said these same things in 2007…shortly after we realized there is no fundamental basis for the peso’s strengthening from 49 to 41…

    let us learn from past mistakes

  • tea tinio

    PESO APPRECIATING. SOON SHALL BE THE SAME AS DOLLAR.

    HOW COME THE PRICE OF FUEL STILL INCREASES?

  • http://joboni96.myopenid.com/ joboni96

    pumapasok ang mga foreign carpetbaggers
    kaya lumalakas ang peso

    namimili sila
    pambili ng murang stocks

    but watch out
    unahan niyo silang mag sellout

    so they will be left
    just holding the bag

    with losses

  • tra6Gpeche

    OFWs are the number one export of the Philippines.
    I believe this is the main reason why the foreign exchange reserves are rising
    and the Philippine money becoming strong. This should, at least, result to cheaper
    price of staples inside the Philippines
    thereby benefiting the ordinary Filipinos. Otherwise, such appreciation of the
    Philippine money is useless and meaningless for the cash-strapped and
    impoverished Filipinos.

  • PH2011

    A strong peso is generally better
    than to have a weaker peso.

    Ironically, some (or majority) of Filipino
    say that they did not feel it?

    Well, the price of petroleum product
    for example will be higher if we have a weak peso rate.

    The effect of higher petroleum
    product is self explanatory. Hence, the advantage of having a stronger peso outweigh the disadvantages, Filipino people felt it…directly or
    indirectly.                                     

     

    • Karabkatab

      It would be very enlightening to most of us if you can put some of your premise into numbers.  I suggest we skip the pricing on petroleum.  Though, simple as it may seem, it is way too complicated for us ordinary mortals to comprehend as far as the PH is concerned.  Take the case of rice, it is a bit less complicated and we do import a lot of this commodity.

    • bucketZombie

      A strong peso is only good for government publicity. If currency appreciation for a country is really good how come China pegs its currency? Even the US$ is effectively made cheaper by printing $ through QEs. Japan’s economy stagnates because the Yen appreciated so much that their exports became so expensive. Japan’s only saving grace is  it has a huge sovereign wealth saved during their heydays. Can we say that of the Phils? We are deep in debt that even unborn Filipinos already owes something. It is all about economics and not government pogi points.



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