Philippines central bank managing excessive volatility as peso trades at 11-year lows
MANILA, Feb 25 (Reuters) - The Philippines central bank is
selling its dollar reserves as a defensive measure to manage
excessive volatility driven by speculation against the peso,
which is hovering near 11-year lows, the bank's governor said on
The Bangko Sentral ng Pilipinas (BSP) chief sought to allay
concern that recent market reforms would put more pressure on an
already weak currency and stoke inflation.
"BSP sells foreign exchange from its reserves to manage
excessive peso volatility," said BSP Governor Nestor Espenilla,
adding that the tongue cancer he had been diagnosed with in
November was successfully treated and he was closely monitoring
the financial markets.
The Philippine peso closed at an 11-year low at
52.34 pesos per dollar on Monday. It ended the week at 51.89.
The central bank chief also dispelled market concern that a
cut in banks' reserve requirement ratio would accelerate
inflation, which hit 4.0 percent in January, the highest since
"What BSP is executing is just an operational adjustment
that should have a neutral effect on the monetary policy
stance," Espenilla told reporters, calling the fears of ensuing
looser monetary policy "unfounded".
On Feb. 16, the central bank cut banks' reserve requirement
ratio by 1 percentage point to 19 percent. The rule, which will
take effect in March, is expected to inject more than $1.5
billion in liquidity.
Speculators, Espenilla said, are using the reduction as a
factor that could dampen the peso.
The central bank lowered the reserve requirement to promote
a more efficient and level financial system that is less biased
against deposit-taking financial institutions, Espenilla said.
"The bottom line, the BSP has many options to maintain firm
monetary control," he said.
Policy setting has remained steady since the central bank
raised rates by 25 basis points in September 2014.
(Reporting by Neil Jerome Morales)
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