BPI Asset Management sees a weaker peso versus the US dollar this coming week, brought by uncertainty over the US Federal Reserve’s (the Fed) decision to hike interest rates in its September Federal Open Market Committee (FOMC) meeting.
Analysts at BPI Asset Management said that, at this point, the possibility of a rate hike in September is still uncertain, given mixed economic-data releases and the instability of markets across the globe.
“We expect the peso to continue falling vis-à-vis the US dollar as investors remain defensive ahead of the FOMC meeting—although a disappointing inflation print, coupled with no change in Federal Reserve policy rates, may allow the peso to partly rebound,” it said.
In last Friday’s close, the peso continued to weaken as investors positioned cautiously ahead of the FOMC meeting next week.
Week-on-week, the Philippine peso depreciated 16 centavos, or 0.34 percent lower, to close at the 46.89 level.
The peso started weak against the US dollar last week, breaching above 47 on Tuesday due to continued concerns over China, emerging markets and the timing of the Fed’s rate hike.
Analysts said sentiment over China improved, which allowed the peso to recover some of its losses, but the spotlight turned to Brazil, whose foreign-currency rating was downgraded to “BB+” with negative outlook, as its fiscal position and political system continued to deteriorate.
The continuation of net foreign outflows prevented any significant rally of the local currency for most of the week.
The Bangko Sentral data showed net foreign direct investments declined 30.9 percent to $383 million in the first half of 2015, from last year’s $554 million, predominantly on the back of investor sentiment anticipating a Fed rate hike and global concerns over China’s slowing economy.
Net equity-capital investments composed the majority of the components at $214 million, four times higher than the $54 million in the previous year.
The BSP said net foreign outflows from stocks, bonds and deposit certificates continued for a sixth straight month in August.
For the month, outflows reached $524 million, higher than the previous month’s read of $160 million. This resulted in a net foreign outflow position year-to date of $64.3 million.