Peso seen to bounce back to P43:$1

MANILA, Philippines - The peso is seen to bounce back to its P43-to-a-dollar territory in three months’ time amid the country’s sound macroeconomic fundamentals, UK-based Barclays said.

“The Philippines’ macro story remains strong – despite the typhoon – providing fundamental support to asset prices. We continue to believe that the peso will appreciate in trend terms, given a supportive balance of payments position,” Barclays regional economist Prakriti Sofat said in a research note, referring to Super Typhoon Yolanda which struck last Nov. 8.

The bank sees the peso finishing at P43.50:$1 in three months, and at P43:$1 in a year.

Sofat noted the strong local currency is in line with recent comments from the Bangko Sentral ng Pilipinas.

“We believe credible macro-policy management and a reform-oriented government put the Philippines in a relatively good position to cope with concerns around Fed tapering,” Sofat noted.

“However, we believe the willingness of the central bank to allow appreciation is limited given peso’s outperformance against its peers over the past 24 months,” she continued.

The peso closed P44.15 to a dollar on Friday, moving sideways from its P44.085-per-dollar finish on Thursday.

The local unit went back to P44-to-a-dollar territory on Monday, as the greenback soared on the back of favorable US economic data announced in the recent weeks.

“In our view, the BSP may not want to erode the peso value of aid/support money flowing into the country,” Sofat pointed out.

“Finally, we continue to believe the BSP will prefer to err on the side of caution and look to build its FX (foreign exchange) reserves further, as a buffer against potential tail risk events,” she said.

BSP Governor Amando M. Tetangco, Jr. last week said the central bank is ready to act in case of any excessive volatility seen in the foreign exchange market.

Tetangco noted then that the BSP is closely monitoring external developments affecting the peso and it is maintaining a “strategic presence” in the market.