Peso to average P52.10:$1 – Fitch unit
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Mon, 01 Jul 2019 16:22:54 +0000
THE Philippine peso is seen to average to P52.10 to the US dollar this year, Fitch Solutions said on Monday, but warned that the local currency’s recent gains would lose steam in the near term.
“We expect Philippine peso gains to slow over the near term, averaging P52.10/USD in 2019, as the boost from dollar weakness and hopes of a cooling of trade tensions fade,” the Fitch Group unit said in a report.
The projected figure is better than the peso’s weighted average rate of P52.72:$1 at end-2018, based on Bangko Sentral ng Pilipinas (BSP) data.
The peso is currently trading against the dollar within the P51:$1 level, which Fitch Solutions attributed to external developments, such as the dovish tilts from the US and European central banks and news on an expected comprehensive United States-China trade agreement.
But noting that “many US demands cross Chinese red lines,” the Fitch unit said that deal was “unlikely to happen [in] the coming months” and would not provide immense support for the peso going forward.
The central bank’s shift to accommodative monetary policy settings will also result in a weaker peso, it added.
“Similarly, the dovish shift by DM (developed markets) central banks could entice the BSP to begin easing more aggressively, weighing on the peso’s attractiveness,” Fitch Solutions said.
It also believes that slowing Philippine economic growth, limited fiscal stimulus and the dovish shift by DM central banks will create a window of opportunity for the Bangko Sentral further slash its key policy rates.
The fourth-and-a-half month delay in the passage of the 2019 national budget resulted in a slower-than-expected economic growth of 5.6 percent in the first quarter of the year.
With this, the central bank started easing its monetary policy settings on May 9, but decided to take a “prudent pause” on June 20 by keeping the overnight borrowing, lending and deposit rates at 4.50 percent, 5.00 percent and 4.00 percent, respectively.
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