Manila: The Philippine peso is still on track for its steepest monthly drop in seven months but the bulk of the decline may be over, according to strategists.
Easing oil prices, the approaching end of the Federal Reserve’s tightening cycle and stronger exports as China’s growth recovers are set to support the currency, according to Michael Ricafort, chief economist at Rizal Commercial Banking Corp. in Manila.
A technical signal also indicates that the peso’s recent rally from a strong support zone may prove to be a barrier to further declines, with the dollar’s failed breakout generating a so-called bearish engulfing candle. The Philippine currency will remain on a bullish trend as long as support in the 56.40 to 56.50 range holds.
The peso has recovered some of its losses after falling to a four-month low of 56.40 against the dollar last week. It closed at 55.62 on Wednesday. Robert Dan Roces, chief economist at Security Bank Corp., “sees a lot of volatility ahead” but expects the currency to be confined to a range of 53 to 56 this year.
The peso’s 2.3 per cent slide this month is evoking memories of its weakness late last year, when its rapid plunge to a record-low 59 per dollar was halted only by aggressive central bank intervention. Bangko Sentral ng Pilipinas last week said it is closely monitoring the currency.
“The peso will be stable at current levels,” said Ricafort. “To avoid inflation, the central bank doesn’t want a weak currency,” he added.