Peso expected to weaken further

MANILA, Philippines - The peso is expected to weaken further and break into the 45 to a dollar threshold in early 2015 as the US economy strengthens and boosts the greenback, according to a report by the First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific.

“The stronger US economy should boost capital flows into the US and keep the US dollar stronger against the euro, yen and other currencies. The peso will not be able to resist the strong tide,” the report said.

According to the report, the peso is expected to average at 45.19:$1 in January and at 45.16:$1 in February.

The peso stood at an average of 44.95:$1 as of end-November 2014, weaker than the 42.45:$1 average recorded in 2013 and the 44.23:$1 average in 2012.

“The US dollar further strengthened against most of its counterparts as the Fed (US Federal Reserve) moves towards having an interest-rate hike by second half 2015. Upbeat growth in the US underpinned by recovering demand and production contributed to the USD’s (US dollar) appreciation,” the report said.

The peso weakened into the 45-to-a-dollar threshold, trading between 44.87:$1 and 45.12:$1 during the month.

This was in line with the movements of the Korean won and the Japanese yen, both of which retreated amid the improving US economic outlook. The Malaysian ringgit and the Singapore dollar also weakened during the period due to the continued drop in global oil prices, the report said.

“The peso-dollar rate is seen to be still on a weakening mode, both in the short and in the long-run,” it said.

“Analysts surmise that the BSP has been intervening all these months to prevent the peso from breaking definitively at the 45:$1 psychological barrier it probably has set for itself. But this may change with the onset of 2015,” the report said.

The Bangko Sentral ng Pilipinas keeps a “market-determined” policy on foreign exchange trading, letting market forces determine the value of the peso against the dollar.

BSP Governor Amando M. Tetangco, Jr. in the late December said the central bank remains watchful of any wild swings in the foreign exchange market as the view for a strong US dollar grows.