Stable foreign exchange rate expected in Q3
NO MAJOR weakening or strengthening is expected of the peso in the third quarter, with trading seen to hover in the range of P43 to P44 against the dollar, according to First Metro Investment Corp. and the University of Asia and the Pacific.
This, despite continuing negative pressure on the local currency, with investors shunning risks amid debt worries in Europe.
FMIC and UA&P said in their latest research that, as investors became more risk-averse following the downgrade of the sovereign rating of Greek bonds by Moody’s and Fitch, profit-taking was seen in the local bond and stock markets.
The seasonal stronger inflow of remittances from overseas Filipinos in May was not able to offset this negative pressure on the peso, they said.
Latest data from the Bangko Sentral ng Pilipinas (BSP) show that as of April, the inflow of remittances reached $1.6 billion or an increase of 6.3 percent year-on-year.
April inflows brought the total in the first four months to $6.2 billion or 6 percent higher than the $5.9 billion recorded in the same period of 2010.
BSP Governor Amando M. Tetangco Jr. said in flows continued to draw support from the steady overseas demand for Filipino skills and expertise and the continuing efforts of banks and other financial institutions to extensively promote and improve upon the financial products and services they offer in the remittance market.
“Nevertheless, there remain positive reasons for buoyancy of the peso,” FMIC and UA&P added. “One is the significantly lower-than-expected budget deficit reported for the first quarter.”
Further, the paper said that with inflation remaining relatively subdued, the peso has generally tracked the movement of the exchange rates of other Asian countries as the crises in Greece as well as in the Middle East and North Africa] continue to unfold.
“Given the uncertainties in the external environment and the Bangko Sentral ng Pilipinas’ reluctance to take up more exchange rate losses, we don’t see any major movements in the peso whether upward or downward,” FMIC and UA&P said.
