HSBC revises year-end forecast of USD-PHP

Hongkong and Shanghai Banking Corp. (HSBC) has revised its year-end forecast for the Philippine peso and US dollar exchange rates, noting that the local currency overcame two notable risk events.

"With the PHP managing to escape these events relatively unscathed, we have turned more positive on the currency and have revised our year-end forecast for USD-PHP to 45.0 from 48.5," HSBC noted in its research paper on currencies of emerging markets.

The two risk events cited by the bank were the presidential elections and Bangko Sentral ng Pilipinas' implementation of new interest rate corridor.

"The Philippine peso has moved onto a stronger footing with the election uncertainty and implementation of the interest rate corridor," HSBC said.

The bank said that attention should now shift to what the Duterte administration is able to deliver.

"Here we believe the story is looking more positive. Initial signs that the government will ease restrictions to foreign investment, boost infrastructure spending and simplify the tax system have the potential to attract FDI into the Philippines," it said.

HSBC also cited other reasons why the Philippine peso looks attractive.

"Unlike many other Asian currencies, the peso is less affected by the external environment, and domestically consumption is bucking the regional trend by remaining strong and supporting corporate profits," the bank said. — John Ted Cordero/BM, GMA News