(Bloomberg) -- Philippine central bank Governor Nestor Espenilla said the peso will trade within "manageable levels" with a flexible exchange rate policy. The currency extended declines.
“We are comfortable that economic fundamentals are alright and that the exchange rate will remain within manageable levels,” Espenilla said in an interview with Bloomberg Television's Haidi Lun on Friday. “We let the exchange rate be determined by market conditions.”
The peso, falling to an 11-year low as it was dragged by regional weakness on concerns over North Korea's nuclear threats, extended declines and fell as much as 0.6 percent to 51.08 per dollar after the governor's comments.
Espenilla, who began his term as central bank chief last month, inherited an economy that's facing its first current account deficit in 15 years and rising inflation pressure. The former deputy governor held monetary policy settings steady in his first rate decision on Thursday while raising inflation forecast to 3.2 percent this year and next from earlier estimates of 3.1 percent and 3 percent, respectively.
The peso has lost 2.6 percent so far in the year, making it the worst performer among Asia's 12 most-actively traded currencies. Still, the exchange rate's movement “has been modest” and the effect of the currency's weakness on consumer-price gains remains “muted,” Espenilla said.
The governor told reporters after the interview that he stands ready to curb volatility in the Philippine peso's trading as the currency slipped.
“We're constantly monitoring developments for excessive short-term volatility not consistent with underlying economic fundamentals and take appropriate action when necessary,” he said in a mobile-phone message.
--With assistance from Rawnna Low
To contact the reporters on this story: Siegfrid Alegado in Manila at aalegado1@bloomberg.net, Cecilia Yap in Manila at cyap19@bloomberg.net, Ditas Lopez in Manila at dlopez55@bloomberg.net.
To contact the editors responsible for this story: Clarissa Batino at cbatino@bloomberg.net, Linus Chua
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