Peso forecast to weaken to 48 to $1 this year

The peso is seen ending 2016 at a weaker 48 to $1 level amid volatility in the market, the research arm of Metrobank said.

“The revised yearend forecast was made under the assumption of higher net imports, uncertainty on US Fed rate hikes and modest OFW [overseas Filipino workers’] remittances growth,” Metrobank research analyst Pauline May Ann E. Revillas said in a note to clients. Their earlier projection was the peso closing 2016 at 47 to $1.

“Nevertheless, our long-term outlook is still that of appreciation as foreign funds eventually flow back to the Philippines given the economy’s strong macro fundamentals, stabilization of the Chinese economy and potential recovery of global commodity prices,” Revillas said.

Noting that the country’s dollar reserves breached the $81-billion mark last month, she added that the country’s international liquidity position remained favorable and should continue to support the peso.

The local currency on Wednesday closed at a stronger 46.86 to $1 from 46.955 last Tuesday.

At the Philippine Dealing System, the peso hit an intraday high of 46.84 and a low of 47.025 after opening at 47 to $1. The total volume traded at the middle of the week slid to $503.5 million from $750.6 million on Tuesday.

“Last week, [the exchange rate] broke its recent range of 47.35-47.75, with risk rallying hard ahead of key US data. Given how markets have reacted to the [nonfarm payrolls data], expect the US dollar selloff to continue,” Metrobank Research said.