Peso seen weakening further in ’22 to 51.8 vs dollar
The Philippine peso is expected to weaken further this year, burdened by the continuing accommodative policy stance and a worsening current account, according to Fitch Solutions.
The company said in a research note it had revised its forecast on the average exchange rate for 2022 to 51.80 against the US dollar from 51.
Data from the Bangko Sentral ng Pilipinas (BSP) show that the peso appreciated slightly against the dollar from an average of 49.62 in 2020 to 49.26 in 2021.
The peso started 2021 at 48.06 and ended at 50.25 to the dollar. As of Jan. 14, the peso closed at 51.12 against the greenback.
Fitch Solutions said the peso spot rate fell 5.8 percent against the US dollar, as the Philippines’ economy was hampered once again by COVID-19 outbreaks, resulting in policymakers continuing monetary and fiscal support.
“Looking ahead, we expect this gradual depreciatory trend to persist over the near term as investors favor emerging currencies with higher carry and more hawkish central banks, against the backdrop of US monetary tightening,” the group said.
Article continues after this advertisement“While we expect the real policy rate to become less negative in 2022, the dovish stance of the [BSP] is likely to weigh on the unit in the near term,” it added, referring to the next three to six months.
Also, Fitch Solutions expects the deteriorating current account outlook to also drag on the peso. Latest data from the BSP show that from January to September last year, the country’s current account was pegged at a deficit of $2.6 billion compared with a surplus of $7.8 billion in the same period of 2020.
