Brisk business: Traders push a cart with buckets of fish at Navotas Fish Port in Metro Manila. The peso, which has risen 1.9% this year, is the top performer in Asia and is forecast to be at 54.80 to the US dollar by the end of June. — AP
MANILA: The Philippine peso’s advance, fuelled by bets on further rate hikes by the nation’s central bank, could face headwinds from a widening trade deficit.
The peso, which has risen 1.9% this year to become the top performer in Asia, is forecast to be at 54.80 to the US dollar by the end of June, near the level where it’s trading now, according to the median estimate in a Bloomberg survey.
The currency is under pressure from outflows after a drop in exports pushed the trade shortfall to the widest in five months.
Even as the peso is supported by expectations that the Bangko Sentral ng Pilipinas (BSP) will deliver another rate hike this week, it remains one of the few monetary authorities in Asia to retain a tightening bias.
“The peso will soon lag behind its regional peers,” said Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. “The trade deficit will remain huge as the global recession cuts into exports. That means there are still more dollar outflows, and it will definitely put pressure on the currency.”
Survey forecasts were mixed, with Standard Chartered Plc being the most bearish with expectations for the currency to depreciate to 57 cents per US dollar, while ING Groep NV predicted the currency will rally to 53.3 cents to the greenback.
The Philippine central bank forecasts a current account deficit of US$17.1bil (RM77bil) this year, which is 4% of the gross domestic product, reflecting an elevated trade shortfall.
Currency traders will be focused on the BSP as all but one of the 18 analysts surveyed by Bloomberg predict the central bank will lift its key rate by 25 basis points on Thursday after it tripled in the past year to 6%. — Bloomberg
