The Bangko Sentral ng Pilipinas incurred about P34 billion in net loss in 2011 mainly due to heavy dollar buying which, officials said, was meant to prevent a sharper rise of the peso against the dollar.
Officials said the BSP, as a policy, allowed the market to determine the exchange rate. However, it buys and sells currencies from time to time to prevent “too much volatility,” which can either be a steep appreciation or depreciation of the peso. They said a sharp and sudden fluctuation of the exchange rate would be harmful to business.
The officials said a net loss for the BSP would be reasonable if this was a result of measures that would prevent sharp and sudden fluctuations in the exchange rate.
Last year’s P33.69-billion net loss of the central bank was, however, better than the P59 billion registered in 2010, when the monetary authority also had to temper the peso’s appreciation through buying dollars from the market.
Data from the central bank showed that in 2011, the peso averaged 43.31 against the dollar. This was stronger than the 45.12 to $1 registered the previous year.
Market players said the peso could have been much stronger if not for BSP intervention.
The upward pressures on the peso last year were attributed to the volatile global economic climate. The sluggish growth of the US economy and the debt woes of the eurozone had prompted foreign fund owners to dump dollar- and euro-denominated assets in favor of those from emerging markets like the Philippines.
The dollar inflows from foreign portfolio investments, as well as remittances from the rising number of overseas Filipino workers, put upward pressures on the peso last year.
Officials said market intervention was not biased against peso appreciation. The central bank also intervenes in the market by selling dollars when there is too much depreciation pressure on the local currency.