Peso seen weakening to 43.50:$1 on risk aversion

The peso is expected to weaken further and test the 43.50-to-a-dollar level in the coming days as the ongoing debt crisis in the eurozone heightens risk aversion globally.

Banco de Oro projects that the peso may stay in the 43 territory in the next few days as uncertainties push fund owners to hold on to the US dollar and liquidate their emerging-market assets, such as those from the Philippines.

“We may continue to see the peso testing the 43.50 (to a dollar) level in the week or so ahead. Volatility due to concerns on Europe’s debt crisis is seen to slow down growth,” BDO lead market strategist Jonathan Ravelas said.

The peso weakened to the 43-to-a-dollar territory on Friday to close at 43.25 against the US dollar, a four-month low, amid speculations that Greece might eventually decide to leave the eurozone, an event that could mean a default on the country’s maturing obligations.

Greece is required to implement austerity measures in exchange for another round of bailout funds.

The measures, however, are highly unpopular and have triggered protests among Greek masses.

Ravelas said the problems in Europe are spilling over to other regions, including Asia, and are generating a negative sentiment toward what are perceived to be “risky” assets.

Ravelas said that since portfolio assets from emerging economies like the Philippines are seen riskier compared with the dollar, fund owners may opt to hold on to the greenback and dump peso-denominated securities.

Economists said some of the channels through which the crisis in the eurozone may affect the Philippines and other emerging markets include export, remittances, and direct investments channels.

The eurozone is a key export market for many emerging economies like the Philippines. It also serves as host to many migrant workers, including overseas Filipino workers.

Many European countries have likewise served as key sources of direct investments.