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Philippine peso now at comfortable level

The Philippine peso has returned to a level that is appropriate and the government will curb excessive volatility to ensure markets are not disrupted, finance secretary Cesar Purisima said.

The Philippine peso has returned to a level that is appropriate and the government will curb excessive volatility to ensure markets aren't disrupted, finance secretary Cesar Purisima said.

"We monitor it among a band of currencies and it's back where it should be," Mr Purisima said in an interview in Hong Kong on Thursda. "We just want to smoothen the movements of the peso so that it's not disruptive."

The peso has fallen more than 5 percent this year as speculation that the US will pare back stimulus led to an outflow from emerging markets in recent weeks. The decline marks a reversal from last year, when inflows into the nation's financial markets surged to a decade high and helped make the currency one of the region's biggest gainers.

The government is "comfortable with the peso's drop because of remittances that have backstopped economic growth in the past years," said Eugenia Fabon Victorino, a Singapore-based economist at Australia & New Zealand Banking Group. "A weaker peso provides more room for remittances to support domestic consumption, and therefore growth."

The peso was the best performer after the won among 11 Asian currencies last year, rising more than 6 per cent against the dollar.

Philippine fundamentals can support the peso at 41 pesos to 43 pesos a dollar, economic planning secretary Arsenio Balisacan said on July 5.

The Philippine government has refrained from selling global bonds this year to manage capital inflows lured by the nation's attainment of investment-grade credit ratings and one of the fastest growth rates in Asia.

It will continue to coordinate debt sales and borrowing plans with the central bank, Mr Purisima said.

President Benigno Aquino's government will boost spending on infrastructure to as much as 25 per cent of the total budget and 5 percent of gross domestic product by 2016 to support growth that has been largely consumer driven, Mr Purisima said.

 

* Bloomberg News

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