“We believe that the BSP has actually been buying US dollars to smoothen the appreciation of the peso. If not for the central bank’s buying, the peso would probably be stronger,” said Philequity fund manager Wilson Sy in his Philippine Star column.
Market sources said the BSP was actively buying the peso at 50 and 49 to the dollar.
They believe that without the BSP’s intervention, the peso could have easily climbed to 48 to the greenback.
The BSP has to step in to balance the impact of a strong peso. While a strong peso leads to cheaper imports, lower inflation and lower debt servicing, Sy said it could be damaging to exporters, business process outsourcing firms, overseas Filipino workers, and farmers and tourism industry.
The peso closed at 48.51 to the dollar on September 14, up more than four percent year-to-date.
While the weak US dollar was the main reason for the peso’s appreciation, Sy said the Department of Finance’s fiscal management and the BSP high currency reserves were instrumental in boosting the local currency.
“Going forward, a combination of domestic and global factors will remain as the primary drivers of the Philippine peso. Ultimately, the movement of the peso will be determined by market forces,” said Sy.