By DANNY O. SAGUN
PIA- Pangasinan Infocenter

MARKET forces determine the value of price of the Philippine peso against currencies of foreign countries.

The Bangko Sentral ng Pilipinas (BSP) stressed this Monday, adding that it allows the peso to seek its own level and only intervenes when there are big fluctuations, up or down, in the foreign exchange rate.

BSP Dagupan branch head Virgilio Tiongson said the country follows a “floating exchange rate system” where there is no set value for the peso compared with other currencies.

The value of the peso against the U.S. dollar, for example, is determined by how much U.S. dollars are supplied and demanded in the Philippine foreign exchange market, he said, adding that if more dollars are demanded than are offered, the price of the dollar in terms of the peso will tend to increase.

Last week, BSP was urged to keep the peso from appreciating further. National Economic Development Authority chief Romulo Neri warned that an exchange rate below 50 to a dollar will be bad for the economy.

To be adversely affected, he said is the export sector to include exporters of handicraft, fruits and various coconut-based products.

He said that intervention by the BSP would even boost the country’s gross international reserves (GIR). GIR as of February was P20 billion which is enough to cover about 4.4 months of imports of goods and payments of services, he said

Other economists agreed with Neri suggesting that BSP intervenes to bring the peso back to a P55-to-a-dollar level.

Economic growth may be achieved by boosting the export sector, said economis professor Victor Abola and Emilio Antonio of the University of Asia and the Pacific.

A stronger peso is generally viewed as good as it reflects improved economic fundamentals – lower inflation rate, high balance of payment surplus, etc. Exporters and overseas workers however earn fewer pesos so that they prefer a depreciating peso.

The central bank may buy or sell foreign exchange usually in times of speculative attack on the currency or there are large fluctuations in the movement of the currency, in order to restore stability in the foreign exchange market.

Torn between opposing forces as regards exchange rate, the national government thru BSP is weighing things very carefully.

“Any decision to be made should benefit the country’s economy as a whole and not just one or two sectors,” Tiongson stressed.