The Philippine peso concluded trading on Friday at 56.315:$1, marking its weakest position in nearly nine months. This could potentially signal a depreciation path for the local currency, as the US dollar remains strong compared to other countries with worse economic signals.
At this level, the peso-dollar exchange rate is nearing the upper end of the Marcos administration economic team’s forecast for 2023, which projected a range of 54-57 pesos against the greenback.
The peso has lost 9.5 centavos against the US dollar since the closing rate of 56.22:$1 on August 10, reaching its weakest position since 56.50:$1 on November 29 of last year. Additionally, the local currency has depreciated by a total of P1.545 against the dollar since the beginning of this month, starting at 54.77:$1.
According to ING Bank, the US dollar remains relatively strong due to the absence of a better alternative in foreign exchange markets. While the economic outlook in the US is not particularly bright, it is still better compared to the slowdown alarms in Frankfurt and Beijing.
Meanwhile, Sumitomo Mitsui Banking Corp. predicts that the Bangko Sentral ng Pilipinas (BSP) may cut its policy rate within this year, considering the slower-than-expected growth of Philippine output in the second quarter. SMBC believes that BSP may reduce its benchmark rate before the United States Federal Reserve, narrowing the interest rate differential between the two countries.
Given the aforementioned outlook, the Japanese banking group says that the possibility of the peso depreciating against the dollar cannot be ruled out.
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