Peso seen to remain firm vs. USD amid correction

The peso depreciated by PHP0.47 or 0.9 percent week-on-week against the greenback last week and closed at a two-week low of 52.16. (Shutterstock photo)

MANILA – The Philippine peso is projected to trade between 52.00 to 52.10 against the US dollar this week after its recent correction following a two-week rally, Michael Ricafort, Rizal Commercial Banking Corporation (RCBC) Economics and Industry Research Division head, said.

The peso depreciated by PHP0.47 or 0.9 percent week-on-week against the greenback last week and closed at a two-week low of 52.16.

He explained that amid the peso’s slight weakness, several factors are seen to continue lifting it up, including the report of the government’s record-high budget surplus last April amounting to PHP86.9 billion.

He said this particular factor is positive for the country’s credit rating, which received a notch upgrade to BBB+ with Stable outlook from S&P Global Ratings last April 30, after the credit rater noted the country’s “healthy external payments position, contained fiscal deficits and stable public indebtedness”.

Another plus factor for the peso is the drop to two-month low of crude oil prices in the international market because of concerns on the US-China trade issues, which, in turn, also resulted in lower US government bond yields.

The recent cut in the Bangko Sentral ng Pilipinas‘ (BSP) key policy rates and on domestic banks’ reserve requirement rate (RRR), the seasonal increase of remittance inflows from Overseas Filipino Workers (OFWs) in line with the school enrollment period, and the tail-end of vacation spending will further boost the local currency’s strength, Ricafort said.

Recent issuances by the Philippine government of foreign currency-denominated bonds in Europe and in China are also positive for the peso, he said, adding that in recent years the local unit started appreciating against the US dollar since 2016.