RP vows to defend peso but bourse falls

RP vows to defend peso but bourse falls

MANILA (AFP): Philippine authorities vowed yesterday to defend the peso from speculators but the bourse plunged 4.1 percent on fears the central bank may not have the ammunition to back its words with action.

Gabriel Singson, governor of the Central Bank of the Philippines, told AFP the country would maintain its existing exchange rate policy and expressed confidence it could hold off speculators.

Singson said the country would maintain its existing exchange rate policy and expressed confidence it could hold off speculators.

He brushed aside concerns about the depletion of reserves and high interest rates aimed at defending the peso, saying "this is temporary -- as the situation normalizes, we bring it back to normal levels."

The central bank chief did not say how long the Philippines could maintain this defense -- of May 20, the country's gross international reserves stood at US$11.8 billion according to official data.

President Fidel Ramos blamed the pressure on the peso on outsiders seeking to undermine the currency and on a deliberate and misleading media attack.

"The unusual behavior of the exchange rates as well as the obvious attacks on the peso ... indicates that there could be a deliberate effort to undermine the peso from outside sources, Ramos told a news conference.

"We are also seeing a media disinformation campaign of some kind," he added.

Ramos did not specify who was behind the alleged campaign but repeated charges by the Trade Department that a foreign newspaper had "twisted statements" of officials regarding a possible peso devaluation.

The Philippine Stock Exchange index fell 109.46 points to 2,589.20 -- its lowest level since May 22 when the bourse hit 2,586.69 points - on concern about the level of reserves to defend the currency.

"People are worried the central bank may soon run out of ammunition to defend the peso," said analyst Astro del Castillo of A and A Securities Inc.

Foreign fund managers were avoiding the bourse on expectations of a depreciation in the peso, analysts said.

The Bankers' Association of the Philippines said the peso was trading Wednesday afternoon at 26.40 pesos to the dollar, the same level where it opened.

The central bank issued a statement saying it "will intervene strongly, using all its available policy weapons to maintain an orderly foreign exchange market and to penalize speculators."

The statement was issued after a meeting of monetary authorities in which officials reiterated that they would maintain the present foreign exchange rate policy.

The Philippine peso has been under speculative attack since Monday after Finance Secretary Roberto de Ocampo was quoted in a news report as saying that the peso could devalue in the coming weeks.

De Ocampo denied the report and the central bank on Monday jacked up overnight borrowing rates to 30 percent from 24 percent while intervening in the market this week to stave off speculative pressure.