Peso likely to weaken vs dollar in Q3

MANILA, Philippines - The peso is expected to depreciate against the dollar in the third quarter of the year as the greenback packs strength from the improving US economy, First Metro Investments Corp. said.

“We believe that the peso will continue to be on a depreciation mode as the US growth proves intact,” FMIC said in the latest issue of the Market Call, a joint project with the University of Asia & Pacific (UA&P).

“However, there might be occasional reversals as BSP (Bangko Sentral ng Pilipinas) seems to favor a strong currency,” FMIC and UA&P  noted.

It forecast the peso to have averaged 45.43:$1 in July, a further slump from the actual 44.98 average in June.

For August, FMIC and UA&P expects the peso to average 45.51 in August and  45.356 in September.

“Stronger employment and housing sales growth in the US underpinned the strength of the dollar as it advanced vis-a-vis other Association of Southeast Asian Nations (Asean) currencies,” the Market Call said.

They noted home sales rose to 546,000 in May, its highest level in seven years while jobs exceeded market expectations at 280,000 during the same period.

“Demand for business equipment likewise posted remarkable growth for the second time this year. These suggest improving demand in the construction and industrial sectors which should support broader growth in the US,” FMIC and UA&P said.

The peso’s 44.98 average in June reflected further weakening from the 44.61 average in May and 44.41 average in April.

FMIC and UA&P said the local currency moved in tandem with other emerging currencies during that period because of the dollar’s strength.

Malaysia’s ringgit depreciated given a decline in exports, while the Thailand baht weakened due to foreign capital outflows.

The Korean won also weakened during the period due to a drop in exports, while Indonesia’s rupiah remained volatile.