BSP urged to probe possible currency ‘flash crash’

BSP urged to probe possible currency ‘flash crash’

The Bangko Sentral ng Pilipinas (BSP) should look into a “possible flash crash” observed on July 20 when the Philippine peso-US dollar rate dropped from P50.54 to as low as P42.82 to a dollar.

“Foreign exchange trading platforms have always been sources of volatility, but when these sudden crashes take place without explanation, and different market makers yield wildly different rates, that could be a problem for Philippine trade and the credibility of the PHP as a currency,” Salceda said.

The House Ways and Means chairperson said that such spikes may be bad for exporters, who are still reeling from closures or business disruption due to the COVID-19 pandemic.

“It was probably human error, but I’m not discounting the possibility that somebody bought an obscene amount of pesos with US currency,” Salceda said.

“We want to watch out for events like this because we are a very foreign currency-dependent country, given our large OFW community. You don’t want wild gyrations like this, especially based on faulty information, human error or technical issues,” he added.

According to Salceda, traditional sources of foreign exchange data such as Tullett Prebon Electronic And Voice Interdealer Broker showed that USD to PHP trading rates ranged between P50.47 to P50.99.

“Reuters’s Currency Rates, which the Bangko Sentral uses, also showed no such real-time spike in the value of the peso,” Salceda said.

“Even Bloomberg showed no signs of the PHP’s spike, but there are reports that some retail traders were indeed able to buy and sell dollars at the rates as low as P42.83, which would be the all-year low,” he added.—LDF, GMA News

Are you a robot?

Why did this happen?

Please make sure your browser supports JavaScript and cookies and that you are not blocking them from loading. For more information you can review our Terms of Service and Cookie Policy.

Surging imports bring peso back to P50-per-dollar level

MANILA, Philippines — Surging demand for dollars amid a spike in imports sank the Philippine peso to its lowest level in more than a year on Friday, with the local unit now back to the P50-level against the greenback.

The local currency shed 0.4% from the previous day to cap the week at P50.08 versus the US dollar. Data showed it was the peso’s weakest performance since it closed at P50.19 per dollar on June 23, 2020.

The peso opened the final trading day of the week at P50.1 before falling to an intra-day low of P50.17 against the greenback. Dollars traded went down to $859.7 million from $1.12 billion the previous day.

Since the beginning of the year, the local unit has depreciated by 4.2%.

In an e-mailed commentary, Nicholas Mapa, senior economist at ING Bank in Manila, said a widening trade gap as a result of surging imports is to blame for the peso’s weakness. As pandemic curbs further ease, importers are exchanging more pesos for dollars to ship in more goods to meet a slow pick-up in consumer demand, thereby weighing on the local currency.

A rallying dollar is adding pressure to the peso, Mapa also said, but he believes the current weakness of the peso is unlikely to prompt the Bangko Sentral ng Pilipinas to pull the trigger and fire a rate hike.

A weak currency may raise the costs of imports, like fuel, and fan inflation, and it’s something that could threaten the BSP’s ultra-loose monetary policy settings. A falling currency may also bloat the value of the government’s foreign debts at a time it is depending on borrowings to fund a costly pandemic response.

But a sliding peso would benefit migrant Filipinos as it increases the value of their remittances, thereby providing their families here with more income amid hard times.

“BSP Governor Diokno appears unfazed by the recent PHP drop however, indicating that the currency continues to be driven by supply and demand conditions. This suggests that BSP will likely refrain from costly policy rate hikes to help stem the depreciation trend,” Mapa said.

“However, we could see BSP changing its tune should the current weakness go on for a considerable period of time. In the near term, we expect BSP to stick to its accommodative stance given that the economic recovery is still in its nascent stages as import levels, although rising, are still below pre-Covid levels,” he added.