Peso seen diving to 51:$1 as global marts turn skittish

The research arm of Metropolitan Bank and Trust Co. (Metrobank) sees the peso depreciating to the 51:$1 level by yearend amid global market volatility.

On the part of the Bangko Sentral ng Pilipinas (BSP), its policy-making Monetary Board would be plotting next moves depending on the impact of the looming rate hikes of the US Federal Reserve,  BSP Governor Amando M. Tetangco Jr. told reporters Thursday.

“The Fed’s judgment on the timing of its next move, as mentioned in [its] statement, will be based on forthcoming data on jobs and inflation,” Tetangco added, referring to the minutes of the policy-setting Federal Open Market Committee (FOMC) released Thursday morning in Manila, which indicated a rate hike “fairly soon.”

“We look at the potential impact on financial markets (which is the segment most reactive to the Fed) in the near term, and the impact on bank portfolios (especially the interest rate sensitive bank balance sheet accounts) as well as banks’ capacity to lend to productive sectors of the economy, in the medium term,” he said.

Last December, the FOMC unanimously voted to raise the key federal funds rate at the 0.5-0.75 percent range. The last time the Fed hiked rates was in December 2015.

US Fed officials expect a total of three hikes to bring the rate up to 1.4 percent by end-2017, moving along inflationary pressures due to US President Donald Trump’s promise to jack up infrastructure and cut taxes.

As such, the peso “will remain under pressure throughout this year amid still volatile financial markets,” Metrobank Research said in its first quarter report issued Thursday. It sees the peso ending at 51.3:$1.

“The uncertainties surrounding the Fed rate hikes, Trump’s economic and fiscal policies, and Brexit negotiations are the main factors that influence the depreciation trend of emerging market currencies like the Philippine peso,” Metrobank research analyst Pauline May Ann E. Revillas said.

The peso on Thursday closed at 50.225:$1, up slightly from Wednesday’s close of 50.23:$1.