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Philippines: Peso projected to hit P52:$1
ANALYSTS anticipate that the Philippine peso will weaken against the US dollar this month due to rising interest rates in the United States and the ongoing Russia-Ukraine crisis.
After closing February at P51.27:$1, analysts expect the peso to thread the P52 to the US dollar level in March.
The impact on the dollar-peso exchange rate, Ruben Carlo Asuncion, chief economist of Union Bank of the Philippines, said will be determined by the timeline or the length of the Russia-Ukraine conflict, adding that the longer it takes to resolve, the more volatility will impact the local pair.
“If the Ukraine situation worsens further and is prolonged, we may say the USD-PHP (US dollar-Philippine peso) thread 52 in March,” he told The Manila Times.
However, Asuncion believes that the Bangko Sentral ng Pilipinas will likely intervene by using its massive dollar reserves to uphold “its line in the sand” at P51.50:$1.
But he noted that interventions have a limit and that the central bank may revise its foreign currency price goal to align with the changing situation.
For Rajiv Biswas, Asia Pacific chief economist for IHS Markit, the peso is likely to experience near-term headwinds due to rising US short-term interest rates with the US Fed expected to begin hiking policy interest rates at the Federal Open Market Committee meeting this month.
As a result of the Russia-Ukraine issue, international oil prices have risen substantially in recent months, with Brent Crude surpassing $100 on February 24th. This, he claimed, is adding to inflationary pressures.
With US consumer price index inflation at a very high 7.5 percent year on year in January and its labor market tightening significantly over the previous year, Biswas believes the US Fed will raise rates multiple times this year.
He expects higher US interest rates this year will draw capital away from emerging economies like the Philippines and into US fixed-income assets.
“This is expected to support some further gradual US dollar appreciation against the PHP, pushing the exchange rate to around 52 PHP per USD by end-March 2022,” Biswas told The Times.
Meanwhile, MUFG Bank Ltd. said the Philippine peso was the second-poorest performing Asian currency outside of Japan in February, trailing only the Indian rupee, due to global risk aversion and a jump in Brent Crude oil prices above $100 per barrel fueled by the Ukraine conflict.
With no end in sight to the Ukraine conflict, the Japan-based lender added that risk aversion, along with a rising oil import bill, reinforces its pessimistic outlook for the peso this year.
“Taking into account the latest geopolitical risks, which overshadows the potential impact of the Philippines’ upcoming presidential, vice-presidential and general elections on 9th May, we have turned slightly more bearish on the peso with our end-2022 USD-PHP forecast at 52.250,” it said in a report released on Wednesday.
Source: https://www.manilatimes.net/2022/03/03/business/top-business/peso-projected-to-hit-p521/1834921