BSP warns against artificially fixing peso below P60 per dollar

The Bangko Sentral ng Pilipinas cannot artificially peg the peso at P60 or stronger against the US dollar without risking a significant drawdown of the country's foreign exchange reserves, BSP Governor Eli Remolona Jr. said on Thursday.

Remolona addressed the question amid persistent weakness in the peso, which has been trading around P61.72 to the dollar. The governor explained that maintaining an artificially stronger exchange rate would require continuous central bank intervention to purchase pesos and sell dollars, a strategy that would rapidly deplete reserves.

"Any attempt to fix the peso at an unsustainably strong level would need continuous support from our dollar reserves," Remolona said, noting that such a policy would be counterproductive to the BSP's mandate to safeguard monetary stability.

The BSP chief emphasized that exchange rates should be determined by market forces, including supply and demand dynamics, foreign direct investment flows, and global economic conditions. He reiterated that the central bank's role is to ensure stability and manage excessive volatility, rather than target specific exchange rate levels.

The peso has weakened significantly this year as the Federal Reserve maintained higher interest rates, making dollar-denominated investments more attractive to international investors. The BSP has raised its own benchmark rates to support the peso, but officials have acknowledged that the currency's movement reflects broader regional and global trends beyond their direct control.