The relative strength of the local currency in recent days, considered for now as an outlier in the region, is seen to wane, particularly as the economic reforms under deliberation in Congress see further delays, ING Bank Manila said.
In an assessment of the country’s dynamics, ING Bank Manila senior economist Joey Cuyegkeng said the newfound strength of the peso may not last long after this reverted to the P49-per-dollar territory in recent trading days.
“We still expect that this recent strength would eventually fade unless the Philippine leadership emphasizes economic reforms,” Cuyegkeng said.
“A sharp correction may happen when positions are closed out within the next few weeks or month. A strong first-quarter GDP and stock earnings reports may delay such a reversal,” the economist quickly added. Data from the PDS Group showed the peso at P49.725 per dollar at the close on Wednesday, having lost 8.5 centavos from the previous day’s trade.
Cuyegkeng likewise said the controversy on inflation and rice imports, as well as the anticipated path of US interest rates, has implications on the peso’s movement down the line.
“Inflationary pressures may arise but this would depend also on postharvest inventory levels. In addition, steady monetary-policy settings are likely in the near term,” Cuyegkeng said.
“When coupled with a reversal of the recent US interest rate easing, narrower interest rate differentials become a factor that could lead to Philippine peso weakness,” he added.