FOREIGN EXCHANGE

(Israel-Hamas, Ukraine-Russia, North-South Korea, China-Taiwan, and China-Philippines).

FIXED-INCOME MARKET

this is likely offset by the global slowdown and lower inflation expectations.

Easing trend in local interest rate benchmarks yields which could lead to lower borrowing and financing costs locally. Improved fiscal performance in terms of narrower budget deficit and lower national government debt-to-GDP ratio, as well as the continued affirmation of the country’s credit ratings at 1-3 notches above the minimum investment grade would also support sentiment on the local fixed income markets.

For [the fourth quarter], we have already experienced a rally since the start of the quarter. Ideally, a continuation of the rally would be preferred, however at the time of writing, we expect prices and yields to stabilize until the end of the year, meaning there would not be much movement in the market for a while.

For Q4 2023, the local bond market may continue to be supported by the lower-than-expected October CPI data, and as the lagged effects of the previous rate hikes work their way into slowing economic activity. On the international front, concerns over the ongoing geopolitical tensions may also limit the expected drop in yields.

The view is that the USD/PHP exchange rate will end 2023 at around P55.10 as seasonal effects push the peso to appreciate, given peak OFW remittances during the Christmas period, the unloading of dollars by the Business Process Outsourcing (BPO) sector to fund employee bonuses, and a general lack of import activity in the fourth quarter.

The peso is expected to remain relatively stable against the US Dollar in the fourth quarter. However, the possibility of a further rate hike by the US Federal Reserve could put some downward pressure on the peso in the coming months.

Easing of the US dollar-peso exchange rate especially as the markets expect seasonal trends to be a positive factor in the foreign exchange market. By the latter part of the fourth quarter, seasonal increase in OFW remittances and conversion to pesos during the holiday season will peak causing peso exchange rate to appreciate versus the US dollar.

The Philippine peso would continue to benefit from a relatively weak US dollar and remittances coming from abroad. We expect the USDPHP to remain at the 55.0-56.0 range for the rest of the year.

For Q4 2023, the peso may be supported by dollar inflows from seasonal remittances toward the end of the year. Nonetheless, gains in the peso may be limited by risk aversion due to worsening geopolitical tensions globally (Israel-Hamas, Ukraine-Russia, North-South Korea, China-Taiwan, and China-Philippines)