Peso strength expected to dip in 2nd Q

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MANILA – With US economic data pointing to a more stable economic upswing in the 2nd quarter of 2014, the First Metro Investment Corp. (FMIC) said on Monday that the peso’s current strength versus the dollar may soon come to an end.

By way of its research note, the Market Call, FMIC reported that the gains of the peso in June may not last very long, as it predicts the US dollar to strengthen in the second half of 2014, especially by October.

The report said that “Developments in the US, in terms of growth, inflation, and interest rates and local expectations regarding the path of inflation will likely dictate the movements in interest rates and activity in the bond markets in the second half.”

The month of June saw the strengthening of the peso, averaging at 43.8 to a dollar, with the quarterly US dollar-peso rate gain recorded 2.7 percent; the sharpest since the third quarter of 2010.

FMIC pointed out, however, that “Much of the peso’s apparent strength has come from the Bangko Sentral ng Pilipinas’s [BSP] intervention. Volatility measure declined to 0.46 versus 0.92 last month, with the peso reaching its monthly low of 43.56 to a dollar and monthly high of 44.02 to a dollar.”