The deteriorating global economy, which brings with it a likely slowdown in money sent home by Filipino migrants and workers abroad, would continue to be an obstacle to the peso’s recovery push, Bank of America’s newly acquired Merrill Lynch said.

In a research note dated March 24, Merill Lynch said the local currency’s recent gains near the P48 per dollar figure would unlikely hold.

The peso closed at P48.16 per dollar yesterday, almost unchanged from Wednesday.

"The peso managed to circumvent significant weakening during the spike in global risk aversion at the start of the year, but with the global macro conditions now worse than initially envisaged, it will get increasingly challenging for the peso to sustain its resilience at levels stronger than 48.50," Merrill Lynch said.

The peso has outperformed most emerging market currencies so far this year, shedding just 1% against the dollar, when other Asian currencies are down by an average of more than 3%, a Reuters tally show.

Remittances, the key support for the country’s balance of payments — the depletion of which could erode investor confidence in the peso — however, cast gloom on the local currency’s prospects.

The central bank expects growth in remittances to stay flat this year over last year’s $16.4 billion and latest data showed these flows, while still in the positive territory, posted modest gains in January.

"The outlook for the PHP will likely worsen as foreign remittances... appear to be faltering," Merrill Lynch said.

Merrill Lynch, which was swallowed by New York-based Bank of America, has recast its forecast for currencies worldwide following a US government plan to purchase a total of $1.75 trillion worth of assets, which the bank said had adversely affected the greenback.

Still, Merrill Lynch is banking on a strong dollar as the global economic picture worsens.

"We expect recent pressure on the USD to fade as markets re-focus on downside risks to global economy activity and the spread of unconventional policies," it said.

"All the while, the USD supply into the [spot foreign exchange] market continues to dwindle as the current account contracts and home bias limits outflows of US domestic capital to a trickle."

Meanwhile, the peso was little changed yesterday amid a cautious market, traders said.

It closed at P48.16 per dollar, just a centavo up from Wednesday’s finish. It traded within a range of P48.08 to P48.23 per dollar after opening firm at P48.11 per dollar.

The local currency has benefited from increased risk appetite on hopes that a White House plan to purge toxic assets out of the US financial system could lead to an early economic recovery. Traders however said that renewed concerns over government finances have dampened investor sentiment.

The Finance department is expected to announce its fiscal performance in the first two months of the year anytime soon.

"Traders worry about the budget deficit figures. The peso is not really the favorite right now in the region," a trader said. — Maria Eloisa I. Calderon