BSP Developing FX Intervention Framework

The Bangko Sentral ng Pilipinas is set to develop a foreign exchange (FX) intervention framework this year.

Remolona cited the importance of looking at the country's peers and not just focusing on the peso-dollar exchange.

BSP Governor Eli Remolona Jr. said, “We're developing a framework for intervention. We think intervention should only happen during times of stress. It’s meant to contain stress.” “I think we've been intervening a bit too much. If it's about containing stress, that also means intervention should be infrequent,” he noted.

He cited, as an example, the experience in October 2022, which he described as a “stressful episode”. In that month, the peso closed at 59 to the US dollar, which was attributed to the dollar’s strength after the sustained hikes in the Federal Reserve’s key rates.

“So those are the events in which we want to intervene,” Remolona highlighted.

The BSP, he underscored, should know what causes the peso movement. “We are talking about the framework for the FXI, so we have homework to do, to study. If we intervene... like I said, it's to contain stress, but how do you tell that it's stress?” he said.

Remolona cited the importance of looking at the country's peers and not just focusing on the peso-dollar exchange.

“So, one of our homework is to know our peers. Which countries are on the same boat as we are? That's still not clear. In the next few weeks, maybe we'll understand more,” he said.

“The Monetary Board wants to be briefed on this. So, the first effort will be to know enough to brief the Monetary Board,” Remolona concluded.

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