Peso seen to weaken to P53:$1 by year end
Sharing my (first) interview with Bloomberg TV Philippines earlier today on dollar peso outlook and the forex market.
Link to the full segment: "Market Movers" from 19:00 to 26:00. https://www.facebook.com/BloombergTVPh/videos/2039976436239109/
Bloomberg TV Philippines’ snap post:
https://www.facebook.com/BloombergTVPh/videos/2040140692889350/
Talking points:
1. We still see downward pressure on the US dollar despite some latest recovery following Fed Chair Janet Yellen's speech on the Fed rate decision. Yellen's latest speech left markets with mixed signals, but this is seen more likely as a strategic move to ensure policymakers and markets price in conditional factors and not hastily respond.However, in the long-term the dollar should appreciate if inflation figures and economic fundamentals support the expected series of rate increases.
2. USDPHP still could range from P50:$1 to P53:$1 being the weakest stand for the peso for the year given external movers specifically the odds of another Fed rate hike this year and three more in 2018.
3. BSP monetary policy is still seen appropriate even when P53:$1 is met. This is because a weaker peso still stays in line with economic fundamentals and encourages more investment in infrastructure, which the government's "Build Build Build" program benefits from. Despite current landing on deficit for the first time in 15 years, long term impact of the weaker peso is still more manageable and supportive to growth than not. Add this to advantage we get from competitive prices in the export side.