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.