Peso seen closing at P48.40:$1 at end-2020

AN Australia-based research body is forecasting a stable Philippine peso for the rest of the year, but warned that the local currency may weaken when domestic demand gathers momentum next year.

In a report released on Wednesday, ANZ Research projected the local unit to end 2020 at P48.40:$1, stronger than the P50.63:$1 finish in 2019.

“PHP’s outperformance this year is driven by the sharp improvement in its external balance,” it said.

Latest data showed that the country’s balance of payments settled at a surplus of $4.11 billion in the first seven months of the year, but remains smaller than the $5.03-billion surplus during the same period in 2019.

This was partly attributed to the country’s trade deficit, which narrowed by 48.1 percent to $10.60 billion in the first six months of 2020 from $20.42 billion in the same period a year ago.

The research body added that an acute compression in domestic demand has translated into substantial reductions in imports.

“We expect this trend to persist for longer, since a meaningful rebound in domestic demand and remittance inflows is not envisaged until early next year,” it said.

The impending upturn in electronics exports will also likely be balanced out by enhanced fiscal delivery in the remainder of 2020.

ANZ Research further emphasized that the peso may continue to benefit from high real yields, given our view that the BSP is likely to stay on hold in the foreseeable future.

“However, some weakness is expected when domestic demand gathers momentum in 2021,” it added.

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Article and Photo originally posted by The Manila Times last September 23, 2020 and written by Mayvelin U. Caraballo, TMT.