Currency Forecast - PHP: Weakness Has Run Its Course, Gradual Strength Ahead - DEC 2017


BMI View: Following recent weakness in the PHP , we expect sideways trading in the near-term as real interest rate differentials are unlikely to narrow further in favour of the US with the BSP looking likely to hike interest rates in the coming months. Over the longer-term, we expect slight peso strength given the improvement in valuations, strong economic growth, and anchored inflation expectations .

Short-Term Outlook (three-to-six months)

The PHP has been one of the worst performing currencies in Asia year-to-date, having weakened by around 2.4% against the dollar at the time of writing. However, in total return terms, the PHP has still outperformed the greenback, which was in line with our view ( see 'PHP: To Continue Outperforming In Total Return Terms', June 30 2017). Over the near-term, we hold a neutral view on the PHP as upside and downside pressures appear roughly balanced, informing our forecast for the currency to end the year at PHP51.00/USD.

Technicals Looking Unconstructive
Philippines - Exchange Rate, PHP/USD
Source: BMI, Bloomberg

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