Peso seen recovering back to 43 to $1

The local currency is expected to recover part of its losses against the dollar over the next 12 months as it gets support from the country’s growing economy.

British banking giant Barclays said the Philippine peso remained one of the region’s least vulnerable currencies to volatility caused by the departure of foreign money from emerging markets.

The peso’s current weakness relative to its regional peers, the bank said, should be attributed to one-off factors, particularly the country’s higher importation needs following the destruction caused by Supertyphoon “Yolanda” in Visayas late last year.

“Despite recent weakness, the peso fundamental story remains robust, in our view,” Barclays said in a report this week. “We believe the strong fourth-quarter GDP (gross domestic product) numbers despite the typhoon highlight the Philippines’ solid macroeconomic fundamentals and we think the peso is one of the least vulnerable currencies in Southeast Asia.”

Barclays said it expected the peso to strengthen to the 43-to-$1 level toward the end of the year from its current level of 45-to-$1.

The Philippines had the fastest-growing economy in Southeast Asia in 2013, expanding by 7.2 percent to beat government targets, even with the damage caused by Supertyphoon Yolanda.

Despite the country’s robust economic growth, the peso has been the second worst-performing currency in the region, next only to the Korean won. The peso has lost a tenth of its value against the dollar since the start of the year.

“The peso (has) been under pressure since early November,” the Barclays report said. “We think this partly reflects long peso positions being stopped out by the depreciation in the peso in response to typhoon concerns as well as by dollar strength.”

Barclays noted that the BSP has shown preference to let the peso weaken to support the purchasing power of families that rely on remittances from migrant workers. The bank said a weaker peso would also increase the value of foreign aid that is bankrolling reconstruction efforts in Visayas.