Peso expected to weaken against the US$ in 2010
MANILA, Philippines - The peso is expected to weaken against the
greenback in 2010 amid expectations of a US economic recovery that will
allow the dollar to strengthen.
The peso, currency traders interviewed last week said, could average between P46.00 to P48.00 to the dollar for 2010.
A currency trader said that for most of 2009, the dollar weakened as
the US Federal Reserve kept interest rates low. Low interest rates made
high-yielding currencies like the peso more attractive to investors.
"With the strength of the US economic figures coming out, the US
Federal Reserve could start hiking rates already by the second half of
the year and the bias towards a weaker dollar would start dwindling,"
the trader said.
In a statement earlier this month, the US Federal Reserve said that
while it was keeping the near-zero interest rates, it recognized that
better employment and consumer spending figures showed an improving
economy.
Another trader agreed that the dollar should be stronger with the
recovery of the US economy from the crisis that started in 2007. "But
the rise in oil price may temper dollar strength," the trader said.
Rafael S. Algarra, Jr., Security Bank Corp. treasurer, said in a
telephone interview that volatility should be expected in dollar-peso
trade next year.
"The US dollar will be under pressure if the problems remain," he
said adding that if the US economy does not improve as expected, there
would be a better market for other currencies.
"Asia is also expected to have better recovery than other
continents. More inflows to the region will support the currencies of
the region," he said.
He noted that remittances, which could post double-digit growth next
year amid better economic conditions, would give support to the peso.
As of October, remittances have reached $14.32 billion, 4.5% higher
than the $13.707 billion recorded in the same period last year.
OFW remittances are projected to grow by 4% to a record $17.1
billion this year, up from an earlier projection of zero growth. For
next year, the government’s forecast is 6% growth.
For the last two trading days of the year, currency traders said
there was still room for a stronger peso, which could trade within the
P46.20 to P46.80 per dollar range.
The local currency finished at P46.51 to a dollar last Wednesday,
the last trading day of the week. This was P0.10 stronger from Dec.
18’s finish of P46.61:$1.00.
Currency traders said the peso could be supported by flows which had accumulated over the long weekend.
One trader said the volume of trade is expected to be low as most
foreign companies and banks have already covered their dollar
requirements.
The trader added there were no other leads expected to affect trading for the week.
"Trade will be mainly affected by the flows. US [gross domestic
product or GDP] data released last week will not affect trade much
because it would be too late for us to react and most people are
focused on the holidays. If really big news would come out, that could
affect trade," the trader said.
The final estimate for third-quarter US GDP released on Dec. 22
showed a weaker-than-expected economy. Data showed the American economy
expanded by 2.2%, lower than the 2.8% estimate released in November and
the first estimate of 3.5%. -- Louella D. Desiderio, BusinessWorld | 12/28/2009 12:25 PM