MANILA - The Philippine peso is expected to weaken within a wide range versus the US dollar over the near term, Fitch Solutions said on Wednesday.
The analytics firm said the peso is currently in the middle of its P49 to P52 per dollar range, and looks set to continue trading within this range over the coming months.
Fitch Solutions said this was because of the uncertainty around the country’s handling of the COVID-19 crisis, the loose monetary stance of the Bangko Sentral ng Pilipinas, and the country’s weakening fundamentals.
“Since our last update (June 17), the peso has depreciated 3.1 percent against the greenback, bringing the year-to-date return to 3.8 percent,” Fitch Solutions noted.
It also noted that the country’s COVID-19 cases have surged in September, which has disrupted economic recovery and hampered investor interest in its assets, and delayed longer-term foreign investment decisions.
“There is also a heightened prospect that the Philippines’ ability to revive its tourism sector will lag other markets, which again will soften demand for the peso relatively.”
Fitch said the continued economic uncertainty caused by the pandemic will push the BSP to keep its policy rate at 2 percent through the first half of 2022.
Foreign investments, however, could pick up if foreign ownership rules are eased in areas such as utilities and retail sectors. Fitch said this could provide support for the peso.
The analytics firm however also warned that a ‘taper tantrum’ scenario or growth shock in which emerging market currencies come under pressure could see the peso weaken sharply.
The peso was at 50.27 to the dollar at the end of Wednesday's trading, or 13 centavos lower than its 50.14 close on Tuesday.