Peso to average P51.7:$1 this year – Fitch unit
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Tue, 07 Jan 2020 16:20:55 +0000
A Fitch Group unit has revised upward its forecast for the peso-dollar exchange rate for 2020 on the back of early positive developments.
In a report released on Tuesday, Fitch Solutions forecasted the Philippine peso to average an exchange rate of P51.70:$1 in 2020 from the previous outlook of P53:$1.
The projected figure is better than the peso’s weighted average rate of P50.74:$1 at end-
2019, based on Bangko Sentral ng Pilipinas (BSP) data.
“Our revision partially reflects a stronger-than-expected starting point for the unit in 2020, but also broad support for Asian FX (foreign exchange) on the back of a ‘phase one’ US- China trade deal expected to be signed in early 2020,” the Fitch unit said.
In the first half of the year, it expects the peso to trade within a range of P50-52:$1, underscoring that unless geopolitical risks quickly flare up in the Middle East, optimism around a US-China trade deal and somewhat stabilizing global macroeconomic data should see some bids for risk assets.
Overall, Fitch Solutions forecasted the peso to touch as low as P50:$1 if global growth risks remain contained and risk appetite rises, but said “we doubt this level could be penetrated in the absence of new bullish catalysts.”
However, it added that with the unit’s volatility at all-time lows, there remains some scope for an uptick over the coming months, which would mean the peso had depreciated toward P52:$1.
“Global risks still linger and any event which weakens demand for Philippine exports, in particular linked with negative developments in China and/or Hong Kong, as they are Philippines’ top export destinations, or causes an inflation shock could unnerve market investors with peso exposure,” the Fitch unit warned.
Lastly, it said that the country’s widening current account deficit, rebounding inflation figures, and downside risks to global growth are expected to prompt depreciation of the peso as 2020 progresses, and through to 2021.