MANILA, Philippines - British banking giant HSBC sees a long-term bullish trend for the peso against the dollar and a possible avoidance of any interest rate increase by the Bangko Sentral ng Pilipinas through 2010 unless inflation shoots up sharply in the latter part of next year.

In a briefing Tuesday, HSBC country treasurer Wick Veloso said if and when the central bank needs to exit from its accommodative monetary policy alongside its overseas peers, the BSP may first resort to contracting more foreign currency swaps with terms longer than the three- to six-month contracts currently in its books.

Veloso said the BSP would likely not be in a hurry to tighten interest rates given the need to support the growth momentum especially through 2010, a presidential election year. At the same time, he noted that there was no danger of the peso sharpy depreciating against the dollar, which in the past was sufficient reason for the BSP to tighten interest rates.

Based on HSBC’s long-term currency forecasts, the peso is likely to gain against the dollar in the years ahead. The local currency is seen ending this year at 46 against the greenback, strengthening to 43.59 by end-2010 and further to P42.50 by end-2011.

“A weak US dollar would always point toward a stronger peso,” Veloso said, noting that low interest rates in the United States were prompting flows of capital into emerging countries and creating a downward pressure on the greenback.

The upward pressure on emerging market currencies is, in turn, seen prompting some central banks to resist sharp local currency appreciation by building up their foreign exchange reserves.

In the case of the Philippines, he said the country was starting to benefit from a global rebound, with export receipts now recovering. Aside from the government’s domestic pump-priming, he noted that strong remittances from overseas Filipinos as well as election spending would help support growth next year.

HSBC sees Philippine gross domestic product (GDP) growth slowing from 3.8 percent in 2008 to 1.8 percent this year, but Veloso said actual growth for 2009 could end up higher than this forecast. By 2010, the country’s GDP growth is seen to accelerate to 4.2 percent and to 4.7 percent by 2011.

Veloso said the central bank would likely restrain itself from raising interest rates too soon next year given the early stages of economic recovery and after a new administration would have been in place after the 2010 elections, he said such caution would prevail.

“There’s a strong chance that interest rates will be flat next year unless the central bank sees a compelling reason [to raise rates] by November or December,” he said.