Metrobank sees peso to hit P38.50 vs US dollar by year end

The Philippine peso could further appreciate this year despite volatilities in the local financial market, with Metropolitan Bank and Trust Co. (Metrobank) still confident that the local currency could appreciate further to P38.50 to the dollar towards the end of the year. The bank said in a research note that the peso will be "looking for direction" in the coming months, following the volatilities triggered by concerns over the health of the global economy. To be sure, the peso has been trading within the P40-P42 range, averaging P41.25 last March, weaker than February’s average of P40.67. But the bank projected that the peso could regain its strength this quarter, with the expectation that dollar inflows will surge as school enrollment starts. "Analysts are speculating that the peso could regain its footing come the tuition months of April, May and June as overseas Filipino worker (OFW) remittances could once again support the local currency," the research note read. The bank added that the peso could end this quarter at P39.75. However, Metrobank said the peso is yet to face further volatilities on persistent political concerns, imminent "hot money" flight, and perceived plateauing of OFW remittances as the global economy slows down with a possible recession in the US within the first half. OFW remittances were recorded at $1.3 billion in January, higher than the $1.09 billion posted in the same month last year, on account of increased deployment of skilled workers abroad. The central bank expects remittances to hit $15.7 billion by yearend, up from the $14.4 billion posted at the end of last year. However, the Bangko Sentral ng Pilipinas cautioned that dollar inflows this year may be less than what the country saw last year, especially amid a US economic slowdown, with balance of payments forecast at $3.4 billion, lower than the $8.57 last year. But Metrobank pinned its hopes on further peso appreciation for the rest of the year on continued foreign exchange inflows, though at a much slower pace compared to last year, on the weakening of the US dollar and wide interest rate differentials with the US. - G. S. dela Peña, BusinessWorld