The peso could weaken by up to 3 percent, relative to last year’s exchange rate, no matter the occassional presence of the Bangko Sentral ng Pilipinas (BSP) in the foreign-exchange market to smoothen the excesses, an economist said.
ING Bank Manila senior economist Joey Cuyegkeng, on looking ahead, said the peso will likely face a 2-percent to 3-percent
depreciation this year and next.
This means the peso may trade between 45.50 and 46 to a dollar this year and in 2016, as the US dollar strengthens on the basis of recovery and anticipation of policy normalization in the world’s largest economy
“Global uncertainties play a significant role. Local political uncertainties will play an increasing role, as the economy moves closer to the May 2016 national/presidential elections,” Cuyegkeng said.
Latest data from the Philippine Dealings System show the peso moving within a very narrow band in the first week of the year, starting at 45 but rounding the week at 45.064 per dollar.
Earlier, BSP Governor Amando M. Tetangco Jr. made it known that the peso is likely to see bouts of volatility this year, but vowed as always to maintain a moderating presence in the market. He also expressed confidence on the country’s growth story as helping insulate the $270-billion economy from the debilitating impact of a weakening currency.
“We expect some volatility in the market in the near-term because of the growing consensus for a strong US dollar. But, as in previous episodes of volatility and portfolio outflows, there will be core investors, who will remain invested in the Philippines because of our positive growth prospects and sound fundamentals,” Tetangco said in a public forum.
Cuyegkeng is of the view the country’s current economic standing— its favorable external position, low inflation and continued growth— will temper the anticipated shocks from a stronger US dollar in the months ahead. “But, unlike some Asian currencies in 2014, the peso’s weakness is contained by favorable external payments position, a healthy monetary sector, a vigilant monetary authority and good economic growth,” Cuyegkeng said.