‘Sharp peso depreciation unlikely’

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The Philippine peso is unlikely to see sharp declines versus the US dollar as the economy’s underlying strengths—outsourcing, remittances and international reserves—will temper volatility, a bank research unit said.

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“Despite the volatilities in the global currency market, the peso is not seen to depreciate sharply against the US dollar,” Me trobank Research said in a quarterly outlook.
It now expects the currency to end the year at P46.80 to a dollar.

The research arm of Metropolitan Bank and Trust Co. (Metrobank) said pressure from capital flight would be tempered by strong business process outsourcing revenues, a yearend surge in overseas Filipino worker (OFW) remittances and good second half economic growth.

It noted that cash remittances by OFWs grew by 4.8 percent to $14.2 billion in the first seven months of the year. The major sources were the United States, Saudi Arabia, the United Kingdom, the United Arab Emirates, Singapore, Hong Kong, Canada and Japan.
Government spending in the second half, meanwhile, will provide an economic boost along with higher consumption.

“The service and industry sectors are still expected to post solid growths in the coming quarters, while the agri sector is seen to remain weak amid soft food prices and the impact of the El Nino phenomenon,” Metrobank Research said.

“Sound macroeconomic fundamentals and still solid international reserve position will continue to provide the needed support to balance any downward pressure given expectations of a still strong US dollar,” it added, pointing out that the country’s gross international reserves remained steady at $80.26 billion as of end-August.

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