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MANILA, Philippines - Metrobank Research expects the peso to end the year at 41.75 against the US dollar given the resilience of remittances, a recovery in exports and stable foreign portfolio investment inflows.
In a research note, Pauline Revillas, research analyst at Metrobank Research, said the euro zone debt crisis, growth prospects in the US and China, uneven monetary policy in emerging economies and investor search for high-yielding options would drive foreign exchange markets this year.
"The peso, like other emerging Asian currencies, remained stable against the US dollar in the first quarter of the year against a still wobbly global economy. The peso has traded within the P42-44 range since the start of the year, appreciating by 2.9 percent from the January 3 close of P43.94," she said.
Revillas said a number of "peso-positive factors" would keep the local currency strong vis-a-vis the dollar. These include foreign portfolio investments - which registered $439 million of net inflows in the first quarter of this year - and the country's robust reserves, which ended the three-month period at $76.5 billion.
While $0.5 billion lower than the first two months tally, "the decline in the reserves level was mainly attributed to payments for maturing foreign exchange obligations of the [national government], foreign currency withdrawals by authorized agent banks, and revaluation losses on the BSP’s gold holdings," the analyst said.
The Bangko Sentral ng Pilipinas had said the country's foreign exchange reserves remain "a comfortable buffer to withstand negative external market developments."
Another positive factor is remittances, which rose to $3.1 billion in the first two months of the year for a 5.8 percent year-on-year increase. The BSP forecast remittances growing five percent this year.
"Indeed, despite the still fragile global economic recovery, optimism is still on emerging economies, like the Philippines, on the back of their relatively solid macroeconomic fundamentals. Thus, the favorable outlook is not different for Asian currencies," Revillas said.
At the Philippine Dealing System, the peso ended Tuesday at 42.690 against the US dollar, weaker than the previous day's close of 42.685.
Trading volume inched up to $893 million from Monday's $787 million.
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