Peso seen to strengthen till end-2012

Appreciation to be moderated by BSP rate cut

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The peso is expected to keep its tendency to appreciate in the next three months, but this will be tempered by a further reduction of key policy rates that is expected in December.

First Metro Investment Corp. and the University of Asia and the Pacific said in a joint research, published in the latest issue of Market Call, that the foreign exchange rate could fluctuate through November to January.

FMIC and UA&P see the peso trading at 41.42 to a dollar in November, appreciating slightly to 41.38 in December and further to 41.27 in January.

“The peso will have an appreciation bias, but this will be moderated by a further 25-basis-point rate cut in December,” they said.

So far this year, the Bangko Sentral ng Pilipinas has cut both the overnight borrowing and lending rates by 100 basis points to 3.5 percent and 5.5 percent, respectively.

FMIC and UA&P also said that other measures that the BSP was prepared to put in place to avoid a further erosion of the Philippine economy’s competitiveness would temper the peso’s continued strengthening.

They added that Philippine sovereign securities should remain in favor among foreign investors due to the strong dollar inflows and the Philippines “very high” international reserves, which FMIC and UA&P expect to reach $84.5 billion by year’s end. The amount would be equivalent to 12 months’ worth of the country’s imports of goods and services.

The reserves amount would also be “much higher in relative terms than our Asean (Association of Southeast Asian Nations) and East Asian neighbors, except for China and Taiwan,” they said.

According to the BSP, cash remittances that overseas Filipinos sent through banks reached $15.6 billion in the nine months to September, an increase of 5.5 percent from last year.

The inflow of foreign portfolio investments also reached $14.7 billion in the 10   months to October, with net inflow placed at $2.7 billion.

The country’s gross international reserves reached $82.1 billion as of the end of October 2012, rising by about $100 million from the previous month’s level.

Earlier this month, the government raised P30.8 billion or $750 million in 10-year peso-denominated global bonds. The proceeds were meant specifically to help buy back as much as $1.5 billion in outstanding Philippine bonds denominated in US dollar and euro. The Bureau of the Treasury plans to issue $500 million in 10.5-year bonds to domestic investors in an auction later this month.

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  • http://pulse.yahoo.com/_WIWYLFLU4LPKS7B2ZLLRVFKS3Y vir_a

    The more our poor OFWs send their money, the stronger the peso gets. However, they will only see the value of their hard earned income goes down, so is the interest the bank pays for their savings deposit. It’s really a real sacrifice on their part because they worked hard for their money and pay part of it by losing its value which only big businessmen benefit. Pnoy is a sure beneficiary too since the peso strength can be attributed to his supposed good performance which is really not true because all the perceived progress we have is due to strong inflow of remittance. His rating keeps going up while he does not compensate it with genuine achievements. Poverty is still high, corruption is still rampant, pyramiding scams are all around, criminality has not gone down, there are no new jobs for our new grads. There are many jobs available but don’t match with the skills of job seeks, so it’s useless.

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