DBS sees peso weakening to 52 to $1 this year
Money

DBS sees peso weakening to 52 to $1 this year

The peso is seen weakening further to 52 to $1 by the third quarter of the year amid the continued recovery of the Philippines from the pandemic-induced recession as well as the hawkish stance of the US Federal Reserve, according to DBS Bank.

The Singaporean bank said the door is open for the local currency to rise to 52 on monetary policy divergence by the third quarter of the year from 51.50 in the second quarter and rebounding to 51.70 by the last quarter of 2022.

DBS said the country’s current account deficit is likely to widen resulting to higher demand for US dollars as more imports come in amid the gradual reopening of the economy from strict lockdown and quarantine measures.

“Although growth will likely to be firmer in an election year, stronger domestic demand will widen the current account deficit. It was probably no coincidence that USD/PHP bottomed last year after overseas foreign worker remittances failed to cover the widening trade deficit,” Wee said.

After appreciating to around 50 to $1 last December after the Bangko Sentral ng Pilipinas (BSP) announced plans to reduce the reserve requirement ratio amid rising Omicron COVID-19 variant, the peso subsequently stayed above 51 to $1 last week as the government imposed stricter lockdown measures.

The local currency shed P2.976 to close 2021 at 50.999 to $1 last year from 48.023 to $1 in 2020.

Metro Manila and nearby areas have been placed under Alert Level 3 since January 3 due to the resurgence of COVID-19 infections after the Christmas and New Year holidays.

As a result, the peso weakened versus the greenback by 0.351 centavos in the first week of January. It depreciated by 17 centavos to close at 51.35 last Friday from 51.18 last Thursday.

The minutes of the Federal Open Market Committee (FOMC) reminded markets that the US Fed has stopped describing inflation as transitory, doubled the pace of tapering asset purchases and signaled three rate hikes this year.

 

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