THE peso remains under pressure from a strong US dollar coupled with fears of the China economy’s hard landing, but the First Metro Investment Corp. (FMIC) sees improvement once the remittances of overseas Filipino workers start pouring in November and December.
FMIC said the peso will continue to be under pressure with the imminent rise in Fed policy rates this year.
It said the 30-day and 200-day moving averages continue to suggest further peso weakness in the near term.
“We maintain the view that the peso will continue to be on a depreciation mode, albeit milder, as the US growth proves intact, coupled with fears of a hard landing of the Chinese economy and nervousness over the government’s abilities to restore confidence in its stock market,” according to FMIC and UA&P capital markets research. “However, there may be a hiatus in November to December as seasonal inflows of remittances from overseas Filipino workers increase,” it said.
The continued strength of the dollar as against other Asean currencies further provided a depreciation bias to the peso as it weakened to P46.1 in August from P45.3 in July, or a 1.9-percent month-on-month depreciation.
The volatility measure increased to 0.39 from 0.16 last month, with the dollar–peso rate ranging between P45.7 and P46.8 to the US dollar .
The dollar –peso rate continued to weaken as the US economy steamed ahead in August and as US policy rates are seen rising by year-end. The weakness seen in the euro zone provides a boost for the US dollar.
The Philippines, however, remains in a better position compared to its neighboring countries.
FMIC said most of the emerging currencies in the Asian region slumped amid the global sell-off of emerging markets assets triggered by the yuan’s devaluation last month.
“With government spending getting into high gear, especially as the May 2016 elections come closer, and a little nudge from exports, we see the economy topping Asean and East Asian countries’ growth, except China’s, with a projected full-year gross domestic product (GDP) growth of 6.2 percent, FMIC said.
The slowdown in Malaysia’s GDP in the second quarter to 4.5 percent and the fall in crude oil prices added pressure to the ringgit’s unattractiveness .
Malaysia’s ringgit dropped 6.6 percent from July, weighed down by the increasing capital outflow concerns spurred by the corruption issues allegedly linked to Prime Minister Najib Razak.
The Thai baht and Korean won tumbled due to capital outflow arising from the expected rise in the US interest rates.
The narrowing of the current-account surplus in Korea further added pressure on the won.
Indonesia’s rupiah also weakened due to a wide current account deficit and a slowing economy.