• Peso assumptions hold despite Greece

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    Range seen at P43-P46 to $1

    The central bank maintains the view that the government’s P43 to P46 to a dollar exchange rate assumption this year remains “realistic” despite the volatilities in the financial markets.

    In a text message to reporters on Monday, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said a protracted resolution of the Greek crisis will be accompanied by occasional volatilities in the financial markets.

    At the weekend, European Union finance ministers were unable to come up with a deal during a crisis meeting but pushed for immediate reforms on the part of Greece.

    Some of these steps include streamlining the value-added tax, broadening the tax base, improving sustainability of the pension system and implementation of spending cuts in Greece.

    “What is crucial [is]for market players to have the long view and refrain from taking drastic actions based on short-term episodes and considering them as fundamentals,” Guinigundo said.

    Nevertheless, the BSP official said the Philippines remains a resilient economy with strong growth prospects, lower inflation forecasts and a robust external payments position.

    At its monetary policy meeting on June 25, the Monetary Board of the BSP noted that ample domestic liquidity and planned higher public spending are expected to further support domestic economic activity and sustain the economy’s momentum in the months ahead.

    The Monetary Board also said that its latest baseline forecasts continue to indicate that inflation is likely to settle within the lower half of the target range of 3 percent, plus or minus 1 percentage point, for both 2015 and 2016.

    Meanwhile, the central bank remains optimistic that it would sustain a balance of payments (BOP) surplus for 2015 despite recording a deficit of $58 million in May, a turnaround from the $380 million surplus posted in April.

    Citing these factors, Guinigundo said, “The P43 to P46 exchange rate assumption continues to be realistic.”

    In Monday’s trade, the peso closed at P45.16 to $1, losing 4 centavos from its P44.12 finish on Friday.

    The local unit opened at P45.15 to $1 on the Philippine Dealing System (PDS) before trading between P45.10 and P45.19.

    Total volume transacted on the PDS rose to $527 million from $456.9 million previously.

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