Peso seen falling back to 50 to $1

With a massive stimulus seen bolstering economic growth in the United States, currencies in the region are expected to weaken against the dollar and the Philippine peso can revert to the 50:$1 level, London-based Capital Economics said.

“At the start of the year we thought that a recovery in the US economy would support risk sentiment globally and modestly boost Asian currencies. But the main shift instead recently has been a rise in US bond yields and the dollar,” Capital Economics senior Asia economist Gareth Leather and Asia economist Alex Holmes said in a report on Friday.

$1.9-trillion stimulus

The Biden administration has rolled out a $1.9-trillion stimulus to support the US economy amid the COVID-19 pandemic.

“We expect this global dollar strength to continue” and a depreciation of Asian currencies can be expected in the next two years, Capital Economics said.

In the case of the peso, Capital Economics projected it to end 2021 at 50 against the greenback from 48.60:$1 as of Friday.

By end-2022, the peso is expected to further depreciate to 52 to $1.

‘Taper tantrum’

Across the region, the currency declines relative to the dollar were nonetheless “likely to be small,” Capital Economics said.

“While the rise in US treasury yields has led to fears of a repeat of the 2013 taper tantrum, Asian countries are much better placed than they were eight years ago to withstand sudden shifts in capital flows,” it said.

“We have penciled in relatively small falls of 2 to 5 percent against the greenback for most currencies this year,” it added. INQ