Philippine central bank tries to calm market, says peso not in free fall

Most emerging Asian currencies fell on Friday as investors dumped riskier assets amid a sharp escalation in tensions between the United States and North Korea.

“We don’t expect it to do a freefall because our economic fundamentals now, unlike before, are solid and very strong. This is reflected in our investment grade (credit) rating,” Espenilla said.

He said it was natural for the peso to show volatility as it adjusts to market conditions and all the “short-term uncertainties” such as heightened geopolitical tension.

The peso was “capable of correcting itself as the market calms down and digests the relevant information,” he said.

Espenilla said the BSP could use its huge pile of foreign exchange reserves to play a stabilizing role in the market.

“The BSP stands vigilant….We’re on the right track,” he said.

Espenilla also sought to downplay worries about the Philippines running a current-account deficit, which may widen to $1.6 billion in 2018, from an estimated $600 million shortfall this year, according to the central bank.

For the Philippines to sustain growth, he said it needs to catch up on high quality investments, especially infrastructure.

“It’s natural for it to run moderate current account deficits. In fact, it’s sub-optimal for it to be persistently running current account surpluses,” he said.

“That’s like the equivalent of deploying our own savings to the world instead of using those internally to finance our own investment…

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