The Philippine central bank amended its rules to encourage hedging against foreign-exchange risk, easing pressure on the peso which slipped to a four-month low last week.
(Bloomberg) — The Philippine central bank amended its rules to encourage hedging against foreign-exchange risk, easing pressure on the peso which slipped to a four-month low last week.
The monetary authority expanded the coverage of the currency rate risk protection program or CRPP, and loosened some requirements to encourage its use. The facility, which allows clients of larger banks to hedge their eligible foreign currency obligations or transactions through non-deliverable forwards, now includes non-trade transactions and investments.
“The lessons from last year’s weakness in the peso show that spillover of risks is inevitable in an increasingly global and interconnected world,” central bank Governor Felipe Medalla said in a statement on Tuesday.
The peso fell to 56.40 per dollar on April 20, its lowest since December 1. It has gained in the the past three days, trading at 55.499 at 3:26 p.m. local time. The Philippine currency plunged to 59 in 2022.
“The CRPP should enhance trading in the future,” said Nicholas Mapa, a senior economist at ING Groep NV in Manila. While the expanded hedging facility may have aided the peso’s recovery, mid-month corporate demand for dollars has also subsided, Mapa added.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.