British banking giant HSBC expects the peso to breach the 50 to $1 level early next year due to the shocking victory of Republican Donald Trump as well as the notable shift in government policy under the Duterte administration. File photo
MANILA, Philippines – The peso tumbled to a near eight-year low against the dollar yesterday, closing at 49.35 from Tuesday’s close of 49.17 to $1 as the dollar continued to strengthen against major currencies.
Yesterday’s close was the lowest since it settled at 49.37 to $1 on Dec. 4, 2008 due to the global financial crisis.
Trading volume increased to $666.5 million from Tuesday’s $600.9 million.
British banking giant HSBC expects the peso to breach the 50 to $1 level early next year due to the shocking victory of Republican Donald Trump as well as the notable shift in government policy under the Duterte administration.
In a report, HSBC said the peso is expected to settle at 49.40 to $1 this year and at 50.70 to $1 in 2017.
HSBC said the election of President Duterte in May has led to a notable shift in government policy and fortunes for the peso.
The bank pointed out Duterte was elected on his proposals of large-scale infrastructure spending, economic reforms and reduction of crime.
Initially, HSBC said the political change could be positive for the peso with reforms paving the way for foreign direct investment inflows.
However, the foreign bank said it underestimated the administration’s change in foreign policy after President Duterte criticized US President Barack Obama for meddling in the government’s campaign against illegal drugs as well as the country’s pivot to China amid tension in the South China Sea.
“This, as well as his off-the-cuff comments, have unsettled investors and led to portfolio outflows hastening since August,” HSBC added.
The British bank said the victory of Trump could improve relations between the Philippines and the US.
“The election of Donald Trump could actually mark a slight U-turn in US-Philippines relations – Duterte has appointed Trump’s business partner as the new trade envoy for the US,” HSBC said.
The bank believes that political uncertainty could delay foreign direct investment (FDI) inflows to the country.
“Still, we believe heightened political uncertainty could delay FDI inflows coming into the Philippines and with the current account surplus narrowing there is now greater room for peso weakness and/or volatility,” HSBC said.
