Best to allow weak peso

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The Philippine peso closed at 45.06 to the US dollar yesterday, its lowest in seven weeks.
There is no cause for surprise, according to an economist, as pressure on the peso-dollar rate is a simple reflection of the continued strengthening of the US dollar.

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“It’s the best time to allow the peso to depreciate—which stimulates the economy—since oil prices have plunged and promises to be weak this year and next,” Dr. Victor Abola, economist at the University of Asia and the Pacific, said.

The local currency opened at P45.08 to $1 at the Philippine Dealing System (PDS) before trading between P45 and P45.10.

The unit lost 2 centavos from the P45.04 close on Wednesday. Total volume transacted on the PDS declined to $609.400 million from $728 million in the previous trading day.

Abola has projected that the peso will continue to weaken to average at P45 to P47 to a dollar this year from the P44.39 per dollar average in 2014 as the US currency further strengthens in line with an improving US economy.

The economist also sees prices of West Texas Intermediate and Brent crude oil this year to drop by over 30 percent, respectively.

Meanwhile, the government’s the peso-dollar exchange rate assumption was at P42 to P45 a dollar and will be kept until 2018.

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