BSP changes eyes on banks' net foreign exchange position »Manila Business Bulletin

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Nestor A. Espenilla Jr., BSP Governor, says when to do this: any revision of the current limit the net foreign exchange position should be carefully examined. "We are studying this as part of the reforms but this one (the net foreign exchange position of banks) we also need time," Espenilla said Friday.

Espenilla pointed out that all in all – with the volatility of exchange rates and other reviews of the liberalization of exchange rate policies – altering the open foreign exchange position of banks could meet with much opposition of the market

"he added.The peso depreciated by six percent on the basis of the average of 50.39 pesos against the US dollar in 2017 compared to the current average of 53.44 pesos on July 27.

Banks' authorized open foreign exchange position – overbought or over- per cent of their capital non-deficient or $ 50 million, whichever is less. 19659007] There has been no change to the limit and the BSP may study market change measures such as raising the ceiling in the net foreign exchange position.

Espenilla says they are studying more FX reforms but timing is crucial in a volatility context of the foreign exchange market. The rise in US interest rates that drain the liquidity of emerging markets like the Philippines is another factor, as well as its effect on domestic liquidity and inflation.

In 2010, when the peso was at P42-P43 level, P45-P46 assumptions of the BSP, the central bank thought to increase the banks' trading limit to $ 100 million worth of $ 50 million, which will lead to the depreciation of the peso.

At this point, increase the overbought FX market. The overbought limit refers to the amount of dollars that banks can buy for their own account that they can trade.

With the peso approaching the P54 level, the BSP has been increasingly concerned about the pressures During the first BSP by-invitation of last week, the dialogue with financial and market analysts revealed that if economic fundamentals are "strong and healthy," they are watching the excessive exchange rate volatility closely

. sustained pressure on the peso could have a negative impact on inflation expectations. In addition, some of the demand side pressures may already be contributing to inflation, given strong sustained economic growth. These justify a firm and timely monetary response. We therefore envisage a strong monetary adjustment at the next meeting of the Monetary Council in August, "he said