MANILA, Philippines — The peso could weaken further to 52 to the dollar as global oil prices continue to rise amid Russia’s invasion of Ukraine and steadily rising consumer prices .
After weakening further last week, BDO chief market strategist Jonathan Ravelas said the new trading range for the peso could be between 51.60 and 51.90 at $1 this week.
“The exchange rate at 51.74 signals that the assault on level 52 is underway,” Ravelas said.
The local currency depreciated by 0.40 or 0.8% in the first week of March after Russia began its invasion of Ukraine. For 2022, the peso has lost 74.1 centavos or 1.5% since closing at $50.999 at $1 at the end of 2021.
From 51.60 to $1 in March, ANZ Research said the peso could weaken steadily to 52 to $1 in June, 52.25 to $1 in September and finally to 52.50 to $1 in December, mainly due to the hawkish US Federal Reserve.
“The Philippine peso has been trading between 51 and 51.50 since January. In February, it was one of the worst performing currencies in Asia, losing 0.9% since the start of the year. peso persisted due to the inflated trade deficit and the recalibration of investor positions ahead of the US Fed’s rate hike cycle,” the research firm said.
He pointed out that imports continued to outpace exports, causing the fiscal deficit to balloon, with the country’s balance of payments position (BOP) turning red in January.
“Although the effects of an aggressive US Fed stance are weighing on the peso, it appears to have eased in February, as evidenced by the net equity inflows into the Philippine stock market since the start of the month,” he said. said ANZ.
With the labor market strengthening, ANZ expects remittances from Filipino Overseas Workers (OFW) to strengthen this year.
Another factor is the opening of the Philippines to fully vaccinated travelers in February, providing much-needed support for the peso.
“The deterioration in the balance of payments will continue to create headwinds for the peso and will see it weaken towards 52.5 by the end of the year,” ANZ said.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said immediate minor support for the peso is at 51.50, while the resistance level is 51.80 at 52 against the greenback.
Ricafort said the peso depreciated to its weakest level in more than two years or since closing at 51.79 to the dollar on October 9, 2019, as global oil prices persisted for more than 13 years. or since September 2008 and also on higher prices of other major global commodities as the war between Russia and Ukraine continues.
Rising global oil and commodity prices are pushing up the country’s import bill, leading to higher demand for dollars which, in turn, is weakening the peso.
Since Russia’s invasion of Ukraine began on Feb. 24, Ricafort said global benchmark oil prices have risen sharply by around $25 to $27 a barrel or at least 26% more. a week to reach $115-123 a barrel – the highest in about 10 years.
Ricafort said the conflict and increased sanctions against Russia could also reduce global trade, causing a slowdown in prospects for global economic recovery.
“So higher inflation would slow economic recovery, amid reduced purchasing power/disposable income amid more spending on oil/energy/other global commodities and to pay higher prices for the goods and services involved,” Ricafort said.
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