Defending peso unnecessary on tamed inflation—analysts

ANALYSTS believe the Bangko Sentral ng Pilipinas can rein in its defense of the peso at the P60-per-dollar level as long as inflation stays within the BSP’s target band.

- ANDREA LOUISE SAN JUAN

Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., explained that the central bank “doesn’t care” whether the local currency hovers around the P60or P61-levels.

Ravelas said the movement of the local currency last Thursday shows that it’s a “two-way street.” Meaning, there’s no need for an intervention, he added.

On March 20, the local tender opened at P59.90, weakening to P60.40 at intraday low and closing at P60.10,

“What the BSP fears is that it’s just going to go from P59.90 and stays at P60.40 and... doesn’t come down. So I think as long as it’s a two-way street, the BSP does not need to intervene,” Ravelas said.

“I think the market in general continues to understand the reason why it’s above P60 because oil continues to stay above $100,” he added.

The analyst explained further that the central bank’s main function is “really price stability.”

“It’s just that sometimes people look at the exchange rate as an anchor, but the key anchor that we all look at is really inflation to stay within 2-4 percent,” Ravelas said.