Philippine peso may test P46 level per dollar - think tank


Posted at Jan 22 2014 04:20 PM | Updated as of Jan 23 2014 12:20 AM

MANILA, Philippines - The Philippine peso is expected to continue to remain weak, according to think tank Global Source.

In a Philippine market report, Global Source noted the Bangko Sentral ng Pilipinas has a bias for weaker peso as an increase in demand for exports is projected this year.

"The hope is that the weaker peso would reverse some of the accumulated loss in competitiveness over the past 10-years versus trading partners, giving exports an extra boost just as demand in developed economies rises," the New York-based think tank said.

"We would not be surprised if it tests the P46/$ level in the weeks ahead," it added.

Global Source said it is "highly unlikely" the peso will go back to the P40 to $1 level.

"We think there is more than a even chance of the peso selling at around P43-P44/$ by yearend, particularly given what we think is a distinctive policy bias for a weaker peso," it said.

Global Source said the weaker peso will not affect the country's economic growth because of the BSP's robust foreign exchange reserve and payments position.

"Interest rates will remain low for a while, perhaps through midyear, which may mean continued currency weakness. Moreover, signals from the BSP are that expected increases in inflation will be manageable and thus, policy rats will remain on hold in the near term," it said, adding that it expects 50 basis points accumulative increases in key policy rates for the rest of 2014.

However, Global Source said the peso's path may be reversed when foreign funds start flowing for the reconstruction and infrastructure projects.