• Peso remains weak at 44.50 at start of week

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    The Philippine peso remained weak as it closed P44.50 a dollar at the start of the trading week.

    The local currency shed 24 centavos from P44.26 per dollar on Friday’s close.

    Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo recently said that the sharper depreciation of the peso is a key concern for the monetary authority.

    He said that if market uncertainty persists, the weakening of the peso could feed into the spending and investment plans of the government and the corporate sector.

    Market uncertainty ignited since last week as minutes of United States Federal Reserve’s July policy failed to provide clarity about the future of $85 billion a month stimulus program known as quantitative easing, which has fuelled an investment splurge in emerging Asia over the past year.

    Guinigundo warned that depreciation pressures could undermine the inflation outlook and thereby diminish the BSP’s flexibility to combat the threats to price and financial stability.

    The central bank is targeting a 3-percent to 5-percent inflation rate for full-year 2013.

    He also assured the public that the central bank continues to adhere to a market-determined exchange rate policy, with some scope for occasional participation in the markets to moderate excessive volatility.

    “Although the BSP does not support a certain level or trend of the exchange rate, we do have some room for responding to foreign exchange movements to the extent that they affect the outlook for inflation, consistent with our inflation targeting approach to monetary policy,” he said.

    However, Guinigundo said that foreign exchange inflows are largely structural in nature, driven by remittances from overseas Filipino workers, receipts from the business process outsourcing industry and foreign investments in peso-denominated assets.

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