MANILA, Philippines - The government has widened the range for its peso assumption this year, a government source said.
This means the peso is now expected to average between 41 and 44 to a dollar this year from the earlier assumption of 41 to 43 per dollar, the source said.
“Higher income, higher growth will trigger higher imports especially for construction requirements,” the source said.
The increase in imports is seen to weaken the peso as residents buy more dollars to pay for the shipments from abroad.
Merchandise imports are forecast to expand by six percent this year from 2013 levels. The value of imports last year is expected to have risen by two percent from 2012.
The range of the peso assumption was stretched due to uncertainties that remain in the global economy.
The peso finished at 44.71 to $1 on Friday, weaker than the 44.68:$1 close the previous day.
The currency depreciated by 7.35 percent to close at 44.395:$1 at the end of last year from 41.05 at the end of 2012.
Traders said the peso’s movement early this year will still be determined by market sentiment toward the US Federal Reserve’s scaling back of monthly asset purchases. The Fed on Dec. 18 announced a modest $10-billion cut in its monthly asset purchases to $75 billion starting this month.
The Fed said it may implement further reductions in the stimulus this year, depending on the upcoming US economic data.