Friday, December 28, 2012

Philippines peso forecast 2013

World Economic outlook - Philippines peso forecast 2013 :The Philippine peso breached a four-year high against the US dollar on Dec. 6, prompting Bangko Sentral ng Pilipinas to think of forward-looking measures to temper any volatility and keep the daily  exchange rate on an even keel. Analysts see the peso running full steam into 2013, saying it would likely head for 39:$1 territory – the highest in over a decade – as it feeds on a robust economy while the US and European markets linger in uncertainty.

 
“The peso has scope to extend its appreciation into 2013,” according to DBS Bank Ltd.'s latest Quarterly Outlook: Economics-Markets-Strategy report. The Singapore-based bank expects the exchange rate to settle at P40.4:$1 in the first quarter of 2013, rising to break into the P39.7:$1 by the third quarter and capping the year at the P39.3:$1 level.

Fundamental support
Dominic Bunning, Hong Kong-based associate foreign exchange strategist at HSBC Ltd., said in an e-mail to GMA News Online: “Our forecast is for USD-PHP to be at 39.5 by year end 2013.”
 
Even with central bank interventions to curb the rise of the peso and temper volatility in the foreign exchange market, analysts said the country's good fundamentals will continue to support the peso.
 
“Taking into account the BSP’s bias to protect the purchasing power of remittances and competitiveness of exports, we expect the peso-dollar rate to drift to 39.50 over a 12-month horizon,” Singapore-based economist at Barclays Prakriti Sofat said in a separate e-mail.
 
Just last Wednesday, BSP Governor Amando Tetangco Jr. announced the government will set limits on foreign exchange forward transactions that cause the exchange rate movement to turn volatile.
 
Earlier this year, the BSP also raised the capital requirement for banks to position foreign exchange forwards as well as prohibiting non-residents from investing in central bank Special Deposit Accounts.
 
Philippine-based traders also noted the Bangko Sentral has been buying dollars to to keep the market stable.
 
But Bunning said the peso's appreciation continued to be driven by “good underlying current account flows” – or the inflow of remittances and earnings from the business process outsourcing sector.            
 
With the country's “growth profile remaining strong and the Philippines... moving closer to investment grade status,” investments in both the bond and equity markets will continue to support capital account inflows, he added.

'Constructive on the peso' 
For her part, Sofat said, “Over the medium term, we remain constructive on the peso given robust growth and balance of payments, a reform-oriented government and an improving ratings trajectory.”
 
The country's balance of payments surplus – which tracks foreign currency flows into an economy – widened by nearly 500 percent in November.  A surplus means Philippines has more funds coming in than it pays other countries, while a deficit means the country does not have the capacity to settle obligations.
 
In late November, Socioeconomic Planning Secretary Arsenio Balisacan said that the gross domestic product may have accelerated to 6.5 percent in 2012  from 3.9 percent in 2011. The economy is expected to grow by 6 to 7 percent in 2013 and to 6.5 to 7.5 percent in 2014.
 
Indicating strong fundamentals, these data have prompted global debt watchers to hint at  the possibility of endowing the Philippine the much-coveted investment grade rating for the first time next year.
 
Last Dec. 6, the peso hit a 57-month high of P40.85:$1, already a 7.3 percent increase from its close of P43.84:$1 on Dec. 29, 2011 – the last trading day for the year.
 
The peso was at 26:$1 when the 1997 Asian financial crisis rocked the region's foreign exchange markets and pulled the Philippine unit sharply down to 41:$1 territory in just a year.
 
Since the onset of the global financial crisis in 2008, Asian currencies started to firm up as foreign investors poured money into emerging markets that include the Philippines which have strong fundamentals.
 
Exporters on the edge
Despite a tempered rise, the peso is trading at around 41 per dollar these days, but its strength has kept exporters and dependents of overseas Filipinos on the edge as they gain less in peso terms.
 
But the peso's settling in the 39 per dollar territory may be a small price to pay as the country wends its way toward becoming one of Asia's leading economies.
 
“So long as the [peso] doesn't appreciate in too extreme a manner then the local economy should be able to adjust and evolve alongside it,” said HSBC's Bunning. “The stronger PHP is a reflection of the stronger economy and would continue to be so into next year.”

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