Philippines Relaxes Curbs on Dollar Buying to Stem Peso Gains

The Philippine central bank doubled the amount of dollars residents can freely buy and broadened the range of approved outward investments in a bid to spur capital outflows and slow peso gains.

Residents can now purchase as much as $120,000 from banks without documentation, Bangko Sentral ng Pilipinas Deputy Governor Nestor Espenilla said today at a press briefing in Manila. Investments in overseas property as well as foreign-currency mutual funds and debt are now allowed using greenback bought locally, he said. Companies can also obtain U.S. currency in the domestic market this year to meet payments on foreign-currency loans that are not registered with the central bank, a move that may boost dollar demand by as much as $1 billion, Director Patria Angeles said.

“This is meant to signal that they want to increase demand for U.S. dollars so their intervention in the foreign-exchange market will be lessened,” said Paul Joseph Garcia,who helps manage the equivalent of $18.4 bilion at BPI Asset Management in Manila. “But the problem is, you cannot fight the inflows. We’re one of the hottest emerging markets right now.”

The Philippines, which won its first investment-grade credit ranking from Fitch Ratings last month, is seeking to slow a surge in capital inflows that made the peso the second-best performer in the region and drove local shares to a record high. Foreign portfolio inflows into the $225 billion economy jumped 79 percent from a year earlier to $7.3 billion in the first quarter, after rising to a decade-high in 2012.

Peso, Stocks

The peso rose 0.1 percent today to 41.205 per dollar in Manila, according to Tullett Prebon Plc. The currency has gained 3.5 percent in the past 12 months, trailing only the Thai baht among Asia currencies. The Philippine Stock Exchange Index has rallied 18 percent this year and closed at a record on April 12.

Tourists can now change back as much as $10,000, double the previous limit, before they leave the country, the BSP said. Companies with unregistered foreign-currency loans were last allowed to obtain dollars locally from December 2011 to February 2012.

The rule changes, which will allow easier access to foreign exchange, are aimed at encouraging fund outflows, Governor Amando Tetangco told Bloomberg Television on March 28 when he revealed the April timetable for the revisions.

“It’s difficult to say if the new measures will weaken the peso but it’s a good opportunity for banks to use their foreign exchange resources,” Angeles said.

Bangko Sentral allowed banks to hold more foreign exchange in February 2007 as the peso traded near a six-year high. Since then, it has increased the amount of dollars that companies and individuals can buy or invest overseas without prior regulatory approval and allowed lenders to trade more foreign-currency derivatives.

In March 2012, the monetary authority raised the limit on purchases of the greenback by importers that don’t need to be supported by documents to $500,000 from $50,000. In October 2010, further caps were relaxed.

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