• Peso further drops to P45.37

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    The Philippine peso further dropped on Monday as it closed at P45.37 to a dollar, shedding 6 centavos from the P45.31 to a dollar level on Friday.

    For his part, BDO Capital and Investment Corp. President Eduardo Francisco said that the peso may recover to between P44 to a dollar and P43 to a dollar level at the end of the year.

    On the sidelines of the launching of Oxford Business Group’s “The Report: The Philippines 2014,” the BDO executive explained that contrary to the projections that the peso may touch the P46 to a dollar territory, analysts at the BDO subsidiary believes that the peso may gain its strength before the year ends.

    “We don’t believe that the peso will hit P46 [to a dollar]. I think the P45 level is already at the top and it should go back to P44, in fact in P43 in the year end,” Francisco said.

    The peso entered the P45 to a dollar territory on January 15, and this was attributed to investors’ portfolio rebalancing on the anticipation of the impact of United States Federal Reserve’s tapering on its bond-buying program.

    Meanwhile, the BDO executive is also optimistic that the Bangko Sentral ng Pilipinas (BSP) will use its measures to find a way to keep the peso to at least P45 to a dollar level, noting that a weak local currency makes imports much more expensive.

    “[Peso depreciation] will help of course the BPO [business process outsourcing sector]but overall, we’re still import-dependent. If the peso gets too weak it [imports]will become so expensive for us. So I think the government will have to manage it,” he said.

    “The BSP also has been recapitalized so they also have tools to help defend the peso which will also be good for us,” he added.

    Francisco also challenged the local industry to be competitive and to improve their product efficiency in order to counter the negative impacts of the weaker peso, like higher electricity prices.

    On the other hand, the central bank has said that the country’s sound external liquidity position like the balance of payments is a useful buffer to counter external shocks that negatively affect the movement of the peso.

    “The weakening of the peso was not totally unexpected, just like the weakening of the other regional currencies. It’s not totally unexpected because there remains uncertainty about the speed and the duration of the Fed taper,” BSP Governor Amando Tetangco Jr. earlier said.

    “The macro fundamentals of the Philippines remains sound and external liquidity position remains sound. In fact we are projecting another BOP [balance of payments]surplus this year, and that surplus significantly is due to current account surplus,” Tetangco added.

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