Philippine central bank Governor Eli M. Remolona Jr. said authorities are prepared to intervene more strongly in the foreign-exchange market should the decline in the peso threaten inflation.
鈥淭he effect of the exchange rate on inflation depends on how big the depreciation is, and we have estimates of that threshold,鈥 Mr. Remolona said in an interview with CNBC on Friday. 鈥淲e would come in somewhat more forcefully than before鈥 once such threshold is breached, he said.
While Mr. Remolona reiterated his comments this week that it would be futile to step in to defend the peso in the face of the dollar鈥檚 strength, he is also outlining the limit of the central bank鈥檚 tolerance for weakness in the currency.
鈥淲e do worry about the peso weakening too much; at some point it becomes inflationary,鈥 the Bangko Sentral ng Pilipinas (BSP) governor said.
The peso slid about 2.6% this month, the worst performer in emerging markets, as higher oil prices fueled by the Israel-Iran tensions weighed on sentiment. The Philippines imports almost all of its oil requirement, making the currency vulnerable to rising energy costs globally.
The peso rose 0.5% to 57.15 per dollar on Friday, snapping eight days of losses. — Bloomberg
