RP issues decrees to curb peso speculation<\/p>\n
MANILA (AFP): Philippine monetary authorities issued a new set
\nof guidelines to banks yesterday to curb renewed speculation on
\nthe peso, which opened 0.8 percent lower against the dollar.<\/p>\n
The Monetary Board ordered commercial banks with outstanding
\nforeign exchange forward contracts with non-residents to submit
\nto the Central Bank of the Philippines an inventory of forward
\nsales and purchases not later than Friday.<\/p>\n
\"Weekly reports shall thereafter be submitted,\" central bank
\ngovernor Gabriel Singson said in a memorandum.<\/p>\n
The circular followed a central bank order suspending for
\nthree months so-called \"non-deliverable forward sales\" of the
\ndollar, so as to enable monetary authorities to strengthen
\nregulations against these transactions.<\/p>\n
Singson said that \"in order to curb undue speculations in the
\nforeign exchange market,\" all forward contracts to sell foreign
\nexchange to non-residents with no full delivery \"shall be
\nsubmitted for prior clearance\" to the central bank effective
\nWednesday.<\/p>\n
The banks are also required to report \"cancellations, roll-
\novers and renewals\" of such contracts, he said, adding that the
\nnew policy will be reviewed after three months.<\/p>\n
Non-deliverable forward sales allow one party to sell a
\ncertain amount of foreign currency such as the U.S. dollar at a
\nspecified value at a set future date.<\/p>\n
The amount, however, need not be delivered and the transaction
\nis settled by paying the differential between the forward rate
\nand the rate on maturity. Officials said the scheme was being
\nused by speculators to bet against the peso.<\/p>\n
The third central bank order banned banks from having long
\nforeign exchange positions \"beyond 10 percent of their unimpaired
\ncapital,\" and imposed a short foreign exchange position of \"not
\nmore than 20 percent\" of their unimpaired capital.<\/p>\n
The central bank gave banks 90 days to bring these holdings
\nwithin allowable limits, and provided for a daily settlement with
\nbanks given two days to bring down holdings within prescribed
\nlimits if they go in excess.<\/p>\n
The peso opened at 28.37 to the dollar Wednesday, compared to
\n28.15 at Tuesday's finish.<\/p>\n
The day's low as of 11:00 a.m. (0300 GMT) was 28.48 to the
\ndollar, or a 7. 9 percent plunge from July 11 levels, the date
\nwhen the central bank abandoned its policy of propping up the
\ncurrency in favor of allowing it to trade within a wider daily
\nband.<\/p>\n
A trader at a commercial bank said banks were expecting the
\npeso to weaken further after closing 0.5 percent lower to 28.15
\nagainst the dollar Tuesday.<\/p>\n
\"They want to know where the peso will settle since there is
\nstill demand from foreign banks,\" the trader said.<\/p>\n
Meanwhile, the economic daily Business World said Philippine
\nbanks have started to trim prime lending rates which had
\nskyrocketed with the monetary authorities' defense of the peso
\nagainst speculators.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rp-issues-decrees-to-curb-peso-speculation-1447893297",
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