Philippines: Peso seen ranging P50-52:$1

• Feb 03, 2022

ON the heels of the expected interest rate hikes in the United States, analysts expect the Philippine peso to weaken further against the US dollar this month.

Analysts see the peso to trade between P50 and P52 to the US dollar in February after closing January at P50.95:$1.

“Peso will start to feel the heat by February with the currency edging higher to 51.40 ahead of the projected first-rate hike by the Fed by March,” ING Bank Manila senior economist Nicholas Antonio Mapa told The Manila Times.

For 2022, he added that the local unit will most likely be driven by global developments rather than domestic trends. The peso is forecast to be under pressure for the majority of the year, as the US dollar is expected to appreciate as the Federal Reserve‘s rate hike cycle approaches.

The Bangko Sentral ng Pilipinas, on the other hand, is sticking to its guns with its dovish rhetoric, which could drive some foreign assets to flee the country, Mapa added.

For his part, Emilio Neri Jr., Bank of the Philippine Islands lead economist, projects the peso-dollar rate to trade in the 51-51.50 range in the first two weeks of February, but to reach 51.50-52 late this month “as the US prepares to hike for the first time since the pandemic just as quantitative easing ends.”

In the meantime, Ruben Carlo Asuncion, chief economist of the Union Bank of the Philippines, said his peso-dollar outlook for February is at 50.50-51.50.

The local currency has recently dropped, he added, due to favorable economic data and restriction conditions. The hawkish US Federal Reserve’s narrative, on the other hand, will continue to drive the exchange rate.

Asuncion also said market participants expect the US Federal Reserve to raise interest rates by as much as five times between now and March.

“Nevertheless, any positive local data may be huge for the PHP (peso) to strengthen but, at this point, the biggest story is the US Fed tightening moves,” he said.

Meanwhile, Rizal Commercial Banking Corp. chief economist Michael Ricafort said major catalysts for the US dollar-peso exchange rate for the month of February include the further easing of restrictions and reopening of the economy toward greater normalcy; United States Federal Reserve’s more hawkish signals; recent strength in US economic data; the accelerated vaccination against the Covid-19; and developments on global supply chain disruptions.

“Election-related leads/catalysts could also partly determine the direction of the exchange rate, in view of the start of the campaign period for national candidates on Feb. 8, 2022,” he added.

Continuing structural US dollar or foreign currency inflows, such as overseas Filipino worker remittances, business process outsourcing receipts, offshore gaming revenues and possible increase in foreign tourism receipts, as well as various fund-raising activities by the country’s largest companies are the offsetting positive factors for the peso, Ricafort also said.

From a previous trading level of P50.95 to $51.04:$1, the peso lost 9 centavos on Wednesday.

Source: https://www.manilatimes.net/2022/02/03/business/top-business/peso-seen-ranging-p50-521/1831585