Exports, remittances, BPO to support the peso: next head of BSP

MANILA — Incoming Bangko Sentral ng Pilipinas Governor Felipe Medalla on Tuesday played down the peso’s depreciation, saying remittances, exports and BPO income will help support the local currency.

A day after the peso weakened to 55.15 pesos to the dollar in intraday trading before recovering to 54.78 pesos, Medalla said almost all currencies were depreciating against the greenback.

“This is primarily due to the US monetary authority (the FED) raising its key rate by 150 basis points (1.5%),” Medalla said.

He also noted that the Philippines’ imports have grown much more than their exports as the economy is recovering faster. Prices for imports, especially food and fuel, also rose significantly, Medalla said.

The dollar has also become more attractive as a safe-haven asset for investors around the world due to the uncertainties generated by the war in Ukraine, he said.

Despite this, Medalla said the recovery in exports, remittances from Filipinos abroad, BPO receipts as well as foreign direct investment are likely to ease “short-term pressures on the currency.”

“Equally important, the country’s gross international reserves continue to serve as a sufficient buffer against disorderly movements in the foreign exchange market,” Medalla said.

He said the BSP “will also participate in the market to deal with excessive short-term volatility.”

“As an inflation-targeting central bank, the BSP will continue to focus on its objective of keeping inflation low and stable, and reacting to exchange rate movements when they pose a risk to the mandate. of BSP’s price stability”, he added.

The BSP has raised its benchmark rate by 50 basis points so far this year in a bid to rein in inflation, which jumped to 5.3% in May.

At the height of the pandemic, the central bank cut its key rate to a record low of 2% and held it there for nearly 18 months to help support the economy.