(Bloomberg) — The Philippine central bank is comfortable with the peso’s recent rally as the gains are not as outsized as those seen in most Asian peers, Governor Eli Remolona said. The peso rose.
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“We’re in the middle compared to our peers,” Remolona said in an interview Thursday. Bangko Sentral ng Pilipinas has not intervened in the foreign-exchange market lately to curb the peso’s appreciation, he said. The peso touched 55.45 in September, the strongest since March.
The Philippine peso advanced 4.6% last quarter as Asian currencies strengthened following the Federal Reserve’s pivot to monetary easing. Still, the currency has lagged regional counterparts, with both the ringgit and the baht surging 14% against the dollar during the period.
“Unlike other central banks that have been prompted to intervene, the BSP is not facing the same pressure with the peso still broadly reflecting fundamentals,” said Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken in Singapore.
“As long as the peso does not overshoot, BSP is likely to stay on the sidelines,” she said.
Peso Range
For its analytical models, the central bank assumes the peso will trade at around the 55 to 56 per dollar levels until the end of the year, the governor said.
These are “common assumptions in our model,” Remolona said. “We don’t take positions on the currencies.”
The peso inched 0.1% higher to 56.32 against the dollar on Friday, in contrast to most regional peers which are weaker. Asian currencies are set for their worst week in more than a year as concern over war in the Middle East and robust US data boosted the dollar.
Remolona also said the Philippine central bank will likely use quarter-point moves to reduce its benchmark interest rate by around 175 basis points through the end of next year.
Read: Inflation Surprise Backs Philippine Central Banker’s Easing Plan
Remolona expects upcoming changes in interest-rate swaps and government securities repurchase market to help facilitate the country’s accession to global benchmarks like the JPMorgan Chase & Co.’s emerging-markets bond index.
“We’re in communication with JPM. We tell them what we’re doing,” he said. The BSP earlier announced plans to revamp the market for swaps as well as enhance the repo market.
Remolona is hopeful that both markets will be operational by the end of this year.
“The banks are eager to trade,” he said. “We’re trying to get things to work.”
–With assistance from Ditas Lopez.
(Updates with peso move on Friday, analyst comment, and governor’s comments on government securities repurchase and swaps markets)
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