BSP to reactivate currency risk protection program

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(File photo)

Metro Manila (CNN Philippines, September 7) — In response to the peso's continuous depreciation, the Bangko Sentral ng Pilipinas (BSP) is gearing up for measures seemingly to prevent speculation.

The peso closed at ₱53.73 against the dollar Friday, recovering slightly from Thursday's close of ₱53.8. Still, it hit an intraday high of almost ₱54 pesos at ₱53.97 versus the greenback.

In a statement, the BSP said it will reactivate its Currency Risk Protection Program (CRPP), which was first implemented at the wake of the Asian financial crisis of 1997, when the peso was as high as ₱55.75 versus the dollar. 

"The CRPP is a non-deliverable forward hedging facility which is aimed at alleviating demand pressures in the foreign exchange spot market from borrowers seeking to hedge their future foreign exchange exposures," the BSP said in a statement.  

Under the CRPP, contracts like loans and investments could be settled in peso upon their maturity, protecting them from possible shocks from the volatile exchange rate.

The program is currently being updated for implementation based on current rules and conditions. It will be made available to eligible borrowers through commercial banks.

Meanwhile, the Philippine Stock Exchange (PSE) has entered bear territory, still unable to recover from the August inflation report.

The market closed at 7,598.64, with all sub-indices save for the industrial sector in the red.

"In the coming weeks, I think investors will be more on the cautious end especially with the US Fed expected to raise again its interest rate by month end," said Ron Acoba, chief investment strategist for Trading Edge, adding that the BSP is likewise expected to raise interest rates in its September 27 meeting.

Gio Perez, trader for Papa Securities, said that net selling at the PSE was at ₱1.4 billion.

"Foreign funds continued to dump on the PSEi as today's net foreign selling amounted to ₱1.4B, the highest since August 14's ₱1.5B. This is also the third consecutive day that foreign selling surpassed the P1B mark," Perez said.

Business giants Ayala Corporation, SM Investments Corporation, and Ayala Land Inc. recorded the largest losses for the day. Metro Pacific Investments Corporation, DMCI Holdings Inc., and JG Summit Holdings, Inc. had the most gains.

"We should remain vigilant if foreign selling continues next week, more so that the PSEi is already in the area of its support level at 7,500," Perez said, adding that developments on the US-China trade war and in Turkey and Argentina might also weigh in on next week's trading.