Weak Peso May See Some Respite – ING Bank

MANILA: The weakening of peso is likely to see some respite as market traders look for risk-lifting sentiment to take profits, ING Bank in Manila has predicted.

“After weeks of weakness, peso correction is possible due to profit taking of long US dollar positions and ahead of the US labor reports,” Manila Bulletin quoted the bank’s senior economist Joey Cuyegkeng as saying.

Cuyegkeng said technicals indicate “some correction” soon.

ING Bank has reportedly revised its peso outlook for the year and now expects it at P47.50:$1 from its previous forecast of P46.60 by end-2016.

“Non-economic factors together with a deteriorating trade balance resulting from strong domestically-targeted imports would keep the peso from strengthening to around P46,” Cuyegkeng reportedly said. “We have retained our year-end 2017 forecast on the assumption that non-economic factors would stabilize and that Fed rate hikes in 2017 would remain gradual and measured.”

Cuyegkeng was quoted as saying that the four percent loss of the peso for the month of September was the worst since 2000 and at the time, the country was mired in political events which saw the local currency depreciating by 30 percent. It was a “full blown political event or risk.” Sixteen years ago, then President Joseph Estrada was impeached and bombings were terrorizing Filipinos in Metro Manila.

“There are some similarities and differences then and now,” said Cuyegkeng. “Economic fundamentals now are more robust with record high FX (foreign exchange) reserves covering more than 13 months of merchandize imports … OFW remittances are at $25 billion or more now while additional sources of US dollar come from a fast growing outsourcing sector.”

In 2000, the peso depreciated to P56:$1 and this is unlikely to happen today considering current economic condition, Cuyegkeng added.

“The four percent or so weakness of the peso in September is similar to the weakness that market saw in July 2005. Further weakness of the peso then was prevented with government action to address the chronically high fiscal deficit –to –GDP ratio then while key political factions supported the constitution. We are not anywhere near such situations. But addressing other pending matters especially in the economic front would improve confidence while ensuring policy stability and continuity would be favorable to financial markets and eventually the economy,” Cuyegkeng was quoted as saying by Manila Bulletin.

(Source: FilipinoTimes.ae)