THE PHILIPPINES holds the biggest foreign exchange (FX) cover among Asia’s biggest emerging economies, suggesting authorities have sufficient firepower to defend the peso from breaching P60 per dollar, according to Australia & New Zealand Banking Group Ltd. (ANZ).
The Philippines’ reserve adequacy ratio stood at 190% as of end-September, the highest among nine Asian nations, according to an ANZ study that covers economies including China, India and South Korea. The ratio took into account a weighted average of exports, broad money, short-term debt and other liabilities.
“The Philippines still has very strong reserve buffers even after the decline in its stockpile this year due to intervention,” Khoon Goh, head of Asia research at ANZ in Singapore, said in an interview on Thursday. “There is a good chance that peso weakness can be contained by FX intervention, a seasonal increase in remittances, and further aggressive rate hikes by the central bank.” ANZ released the study last week.
Traders are assessing the ability of central banks to defend their currencies as the US Federal Reserve vowed to push rates higher. In the Philippines, another $30 billion in FX reserves can be used to defend the peso before any concern over the stockpile’s adequacy emerges, ANZ said.
Bangko Sentral ng Pilipinas is stepping up efforts to support the peso, which fell to a record-low P59 per dollar in late September and has held near that level since then.
BSP will increase its benchmark interest rate by 75 basis points at its Nov. 17 meeting to match the Fed hike, Governor Felipe M. Medalla said on Thursday. — Bloomberg
