BSP may ease forex rules anew due to global financial market woes

MANILA, Philippines—The Bangko Sentral ng Pilipinas is mulling over plans to further ease foreign exchange rules in the country in light of recent developments that shook up financial markets abroad.

During the Philippine Economic Forum last Friday, BSP Governor Amando Tetangco Jr. said that the present foreign exchange rules could be broadened to cover other currency transactions.

Tetangco cited the recent depreciation of the peso and the decline in stock prices in the past few weeks as reasons enough to consider liberalization.

Stock prices started to drop sharply in September, with the peso depreciating at around the same time.

In the first eight months of the year, the peso had appreciated by over 5 percent from its closing value at the end of 2010 due to the strong appetite of foreign portfolio investors for emerging market securities and equities.

After closing at 43.84 against the US dollar in 2010, the peso appreciated until it breached the 42-to-a-dollar territory. Now, the peso is back to the 43 level.

This development has been brought on by the long-standing debt problems in the eurozone, where investors have been forced to liquefy their assets and hold on to dollars.

The BSP believes that further liberalizing foreign exchange rules would help temper the volatility of the peso. For instance, if people can more easily sell dollars, then the depreciation of the peso may be tempered.

The last time the BSP liberalized foreign exchange rules was in October 2010. That time, however, the central bank meant to temper the appreciation, rather than the depreciation, of the peso.

The BSP believes that capital flight can be prevented by relaxing foreign exchange rules.