Marcos says government ready to defend peso

PRESIDENT Ferdinand R. Marcos, Jr. on Tuesday said the government is ready to “defend the peso” in the next few months, as its weakness might continue to stoke inflation.

“We may have to defend the peso in the coming months, but the overall forecast is that we are still doing better than other countries in terms of inflation, though economic developments are still anticipated,” he said via Twitter.

Mr. Marcos made the remarks after meeting with his economic team in Malacañang on Tuesday morning.

The Philippine peso closed at P58.75 versus the US dollar on Tuesday. Year to date, the local unit has weakened by 15.19% or P7.75 from its P51 close on Dec. 31, 2021.

Socioeconomic Planning Secretary Arsenio M. Balisacan told a news briefing the government could also “intervene” in the financial markets.

“We are also monitoring the developments closely so that we can deploy our monetary tools like the interest rate for example and how we can intervene in the financial market to (curb)… the depreciation of the peso,” Mr. Balisacan said.

Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla earlier this month said the central bank has been “active” in the forex market “but of course, we sell strategically.”

The country’s gross international reserves (GIR) fell to a two-year low of $95.01 billion at the end of September, 2.4% down from $97.44 billion in August. This was the seventh straight month of decline since February.

TOP PRIORITY
Mr. Marcos said his administration’s No. 1 priority is still inflation, amid continued price increases in food, oil and utilities.

“We will continue to use interest rates to mitigate the effects,” he said.

Inflation accelerated to 6.9% in September from 6.3% in August and 4.2% in September 2021. This was the sixth straight month that inflation breached the BSP’s 2-4% target this year.

Year-to-date inflation averaged 5.1%, higher than 4% a year ago but below the BSP’s 5.6% forecast for 2022.

The BSP has raised key policy rates by 225 basis points (bps) this year to curb inflation and stabilize the foreign exchange market.

Mr. Medalla on Saturday said the policy rate should be over 100 bps higher than the Fed’s rate “to have some form of exchange rate stability.”

The US federal fund rate is now 3-3.25%, while the BSP’s benchmark rate is 4.25%.

The US Federal Reserve is widely expected to raise borrowing costs by another 75 bps at its Nov. 1-2 meeting, which will add to the cumulative 300 bps increase since March.

The Monetary Board’s next policy-setting meeting is on Nov. 17.

PESO UP
Meanwhile, the peso strengthened on Tuesday against the dollar on profit taking.

It closed at P58.75 versus the greenback, strengthening by 25 centavos from its P59 finish on Monday, Bankers Association of the Philippines data showed.

The peso opened Tuesday’s session at P58.90. Its weakest showing was at P58.995, while its intraday best was at its finish of P58.75.

Dollars exchanged rose to $610.8 million from $524.9 million on Monday.

“The peso strengthened slightly due to profit taking by market participants near the 59-peso level,” a trader said in an e-mail.

The peso also rebounded after gains in the local and US stock markets, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The benchmark Philippine Stock Exchange index rose by 158.31 points or 2.65% to close at 6,128.64, while the broader all-share added 54.88 points or 1.71% to 3,253.51.

The peso’s performance was also affected by Mr. Balisacan’s statement that they were closely monitoring the battered local currency and its impact on rising inflation, Mr. Ricafort said.

“The local currency might appreciate further amid potentially strong Eurozone inflation reports,” the trader said.

The trader expects the local unit to move within P58.65 to P58.85 a dollar on Wednesday, while Mr. Ricafort gave a forecast range of P58.60 to P58.90 a dollar. — K.B.Ta-asan and K.A.T.Atienza