MANILA, Philippines-The Philippine currency is expected to further weaken against the dollar in the next two years and may fall to P52.50 level by the end of 2017 and to the P56 level in two years, according to an analyst on Wednesday, July 20.
BPI Securities research head Haj Narvaez believes that local currency may fall to its lowest level against the dollar because the government’s infrastructure program drives import.
In his interview with ANC, Narvaez said: “We’re still bearish on the peso versus the dollar… This is part of the short-term pain that we have to deal with.”
On Wednesday, July 19, the peso closed from P50.94 from P50.77 on Tuesday.
According to a report by ABS-CBN News, peso is among Asia’s weakest currencies due to the import requirements from an unprecedented infrastructure overhaul.This year, the local currency, which weakened by about 1% against the dollar, has become the worst performing currency among the 12 currencies in Asia.
However, the International Monetary fund believes that the country has ample foreign currency reserves which will help the economy withstand pesos’ weakness.
BDO Chief Market Strategist Jonas Ravelas explained: “With the strong U.S. jobs data last Friday, the dollar could rise further as it created a possibility of another rate hike by the end of the year. If the peso depreciates faster, it could eventually affect to a certain extent those portfolio flows.”
Last week, Bangkok Central ng Pilipinas (BSP) Governor Nestor Espenilla said that the BSP is managing excess volatility.
Espenilla, who advised the public not to stress over the conversion, said the BSP was focused on managing inflation, not on setting an exchange rate target.
“The approach of the BSP is to let the exchange rate reflect the underlying market conditions… as far as the BSP is concerned, we are there, we are managing that there is no excessive volatility,” Espenilla said.