Peso rate to stay at

ING economist says

The peso is seen to keep within the P51 band versus the US dollar for some time with the central bank support and steady foreign exchange inflows from remittances.

“(The) peso is likely to remain within R51-R51.60 range for now,” said ING Bank senior economist Joey Cuyegkeng. There are corporate-funded inflows that could “help finance the seasonally peaking imports” on top of the remittances sent home by overseas Filipinos which the Bangko Sentral ng Pilipinas (BSP) forecast will grow four percent this year.

“(These and the) BSP’s guidance could keep peso in a range and soothe importers about a steadier FX (foreign exchange) rate than peso movement in early- to mid-August,” said Cuyegkeng.

Based on the ING’s latest Global Market Research report on the Philippines, these are offsetting factors to back up a relatively stable exchange rate.

The peso gained some strength recently and Cuyegkeng said the BSP’s announcement that it will not allow further peso weakness helped calm the market.

“A warning against speculators was seen as BSP’s re-engagement into the currency market by warning that it would use macro-prudential tools also to counter any speculation.”

Still, Cuyegkeng said market expectations of a steady monetary policy in the near term could still contribute to peso depreciation.

“Prevailing views of moderate inflation that is within the target range and expectations of strong economic activity over the policy horizon are reasons to keep policy settings steady. The official view that the imbalances especially in the external accounts are not signs that the economy is overheating since inflation remains moderate while the fiscal deficit remains within acceptable levels. The external imbalance is seen to be self-correcting with a weaker peso,” he noted.

“We believe that the self-correcting