Peso weakness seen as temporary

The peso’s weakness amid a stronger US dollar following the United Kingdom’s “Brexit” vote will only be temporary even as the local currency hit its weakest level since the national elections here last May.

On Monday, the peso closed at 47.03 to $1, the softest close since hitting 47.09 last May 6, the last trading day before elections were held on May 9. It was also weaker than last Friday’s close of 46.95:$1, which reversed gains made the previous day.

If election jitters weakened the peso more than a month ago, the UK’s vote to leave the European Union last week was to blame this time.

“With uncertainty comes the desire for safety and thus the US dollar is king for now,” Bank of the Philippine Islands associate economist Nicholas Antonio T. Mapa told the Inquirer.

Following the Brexit decision, “financial markets in Asia tracked the selloff seen on Wall Street with risk assets offloaded with uncertainty over the impact of the Brexit-haunting sentiment,” Mapa said.

More uncertainties were also emanating from concerns raised after the historic vote. “There have been conflicting camps on the speed of the exit with EU Commission President Jean-Claude Juncker all but ready to sign the papers to push the UK out of the EU while German Chancellor Angela Merkel appears to want to take a more gradual exit strategy,” Mapa noted.

“We’re also hearing about some camps calling for a second round of referendum, as ‘#bregrexit’ trends online and more than two million votes for the petition signed,” Mapa added, referring to the hashtag of voters who said they made a mistake in voting for Brexit.

But moving forward, the peso is seen bouncing back amid a robust domestic economy.

“As markets realize that there’s actually very little effect on local markets (the UK is currently our 15th top trading partner) and that growth in the Philippines will remain resilient, we’ll see risk currencies bounce back,” said Mapa.