Fitch downgrades outlook on ‘weak’ Philippine peso

A teller inspects one thousand pesos bills inside a money changer in Manila. REUTERS

MANILA – Fitch Solutions Macro Research has revised its outlook on the Philippine peso, as it is now seen to weaken further this year given contagion fears and rising interest rates in the United States.

In a report released on Monday, Fitch said it revised its outlook on the Philippine peso as it is now expected to end the year at P54.80:$1, softer than the earlier forecast of P54.00:$1.

“(T)he Philippine peso has weakened by more than 8.0 percent against the US dollar since January, exacerbated by the sell-off in Emerging Market (EM) currencies since mid-April,” the report read.

“We note that market sentiment and technicals remain bearish and these factors are likely to stay central in the near-term,” it explained.

Just last week, the Philippine peso closed at P54.325:$1, the weakest of the local currency in nearly 13 years since closing at P54.425:$1 on November 22, 2005.

With this, Fitch said the peso is now expected to average P53.00:$1 for the year, compared with the earlier forecast of P52.52:$1.

“The Philippine peso is looking technically bearish in the near-term and we believe that fears of contagion from other EMs and rising US interest rates will weigh on the currency further despite the Philippines central bank’s policy actions,” said Fitch.

The Bangko Sentral ng Pilipinas (BSP) has already hiked rates four times this year, as inflationary concerns remain elevated.

Fitch also revised its end-2019 outlook for the peso to P56.33:$1 from P54:$1 previously, given inflation and deficits.

“Over the longer-term, higher inflation and rising twin deficits will also act as a drag on the peso, which will likely offset the support from remittances,” it said.

London-based Capital Economics in a recent report also said the peso is expected to reach P58:$1 by end-2019, but such claims were dismissed by Budget secretary Benjamin Diokno as “unfounded” and “highly unlikely.” (GMA News)


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