GoldmanSachs turns more bearish on PH peso

The Philippine peso is on its way to further weakening as the revving up of the economy amid further re-opening takes its toll on the country’s position in terms of transactions with the rest of the world, particularly on the inflow and outflow of capital.

New York-based GoldmanSachs also said in a commentary that it expects the US dollar to strengthen further over the next three months.

However, the investment banking firm sees the greenback as “highly overvalued” and, thus, maintains a bearish outlook vis-a-vis Asian currencies for six months to a year.

But even then, the further depreciation of the Philippine peso is in the cards.

“We are bearish on the PHP as re-opening of the economy should lead to a widening of the current account deficit,” GoldmanSachs said.

Last week, the Bangko Sentral ng Pilipinas (BSP) said its gross international reserves (GIR) decreased slightly to $106.8 billion as of the end of April from $107.3 billion a month earlier.

However, the BSP said its reserve assets—comprising foreign investments, gold, foreign exchange, reserve position in the International Monetary Fund, and special drawing rights—continued to represent a more than adequate external liquidity buffer.

The latest GIR level is equivalent to 9.4 months’ worth of imports of goods and payments of services and primary income. Such reserves are considered adequate if they can cover at least three-months’ worth.

In the first quarter of 2022, the net outflow of short-term investments that are registered with the BSP narrowed significantly to $16 million from the $467 million net outflow recorded in the same period of 2021.