Weaker peso seen by yearend

The research arm of Metropolitan Bank and Trust Co. (Metrobank) has revised its yearend forecast for the peso to reflect volatilities in financial markets.

In a research note, Pauline Revillas, research analyst at Metrobank, said the peso is now seen ending the year at 43.60 to a dollar, weaker than the bank’s previous forecast of 43:$1.

The peso last year finished at 44.395, depreciating 7.35 percent from its 41.05 finish in 2012. The local unit’s movement was in line with that of other Asian currencies, the Bangko Sentral ng Pilipinas has said.

But Revillas stressed the country’s gross international reserves (GIR) should continue to provide fundamental support for the local unit despite the slight decrease in its level last month.

“Despite the lower reserve levels, we do not see a cause of concern as we still think that the reserves are still at a healthy level – enough to shield the economy from the impact of external shocks,” Revillas said.

“Indeed, despite the volatility in the market which saw the peso depreciate against the US dollar, the GIR levels remain above the $80-billion mark. Thus, the country’s international liquidity position remains favorable and should continue to support the peso,” she said.

The BSP keeps a hands-off policy on the peso, as it allows market forces to determine the rate. However, it has time and again stressed that it remains ready to act against any excessive volatilities in the foreign exchange trading.

Central bank data showed GIR amounted to $ 80.435 billion in September, down slightly from $ 80.872 billion in August due to revaluation adjustments on the BSP’s gold holdings and payments for maturing foreign exchange obligations of the national government.

The GIR shows a country’s ability to pay for its foreign debt and its imports of goods and services.

The September figure is enough to cover 10.9 months’ worth of imports of goods and payments of services and income. Moreover, the level is equivalent to 8.4 times the country’s short-term external debt based on original maturity and 6.1 times based on residual maturity.

The BSP has forecast the GIR level to reach $ 85.3 billion by yearend.

Last year, foreign exchange reserves reached $ 83.187 billion, lower than the $ 83.831 billion recorded in end- 2012.