As regional currencies weaken: Peso exchange forecast up for review

MANILA, Philippines - ING Bank is taking a second look at its P46.5 to $1 year-end forecast amid the continued weakening of regional currencies against the US dollar.

 Joey Cuyegkeng, senior economist at ING Bank Manila, said the local currency is likely to trade within 46.50 to 47 per greenback in the near term.

“External developments and local political developments may keep the market testing the upper end of the range especially if US labor data surprises on the upside,” Cuyegkeng said.

Political uncertainties are looming and could be a source of the Philippine peso weakness, he also said.

He said candidates for national posts such as the presidency, vice presidency and the Senate are expected to file their certificates of candidacy with the Commission on Elections by late October.

He added political surveys are also coming out this month or early October.

“Any leadership uncertainty despite even favorable survey results weakens the currency. The peso is unlikely to go against this norm. Recent actions of frontrunners in the presidential race have not been encouraging and have been seen as pandering to a special group,” he said.

“We continue to review our year-end forecast of 46.50 which assumes that US normalization would be quite gradual and political developments would be favorable for the Philippine financial markets,” he also said.

According to him, risk to worse side would mean a weaker peso by year-end.

The Bangko Sentral ng Pilipinas (BSP) believes the current weakness of the peso is not reflective of the sound economic fundamentals of the Philippines, backed by steady growth of remittances from overseas Filipinos as well as earnings by the business process outsourcing (BPO) and tourism sectors.

BSP Deputy Governor Diwa Guinigundo earlier said the value of the local currency is being affected by the “herd mentality” in the Asia Pacific region.

“It is a regional phenomenon. People are speculating that the US dollar because of the pending normalization in the US will continue to strengthen versus regional currencies including the peso. We were affected by the herd mentality prevailing the foreign exchange markets today,” he said.

But he said monetary authorities are confident the Philippines would be able to survive external shocks brought about by the global economic slowdown, the debt crisis in Greece, the stock market rout in China, the impending interest rate increase by the US Federal Reserve, among others.

“Because we have fundamental basis for stability, we always say that once the market is able to digest what is happening abroad and here in the Philippines. They should be able to think twice before leaving the Philippine market,” he said.

Guinigundo said, the Philip- pines has booked a record 66 straight quarters of gross domes- tic product (GDP) growth.