Peso may break P39:$1 territory in 2013

Posted at 12/25/12 9:03 AM

MANILA, Philippines - The peso is expected to remain strong next year and may even break into P39:$1 territory amid the country's good economic conditions, traders said.

"Given the strong GDP (gross domestic product) numbers and pending investment grade (rating), the peso will remain firm next year, [and] possibly reach P39 to $1 territory," a trader said in a phone interview last week.

The National Economic and Development Authority earlier this month said economic growth may have accelerated to 6.5% in 2012 from the dismal 3.9% last year, surpassing government target's of a 5% to 6% expansion.

Philippine GDP growth already reached 6.5% in the nine months to September, buoyed by consumer spending and helped by public disbursement of funds. The economy is expected to grow by 6% to 7% next year.

The trader said that together with the pending investment grade rating for the country, funds are expected to pour in, thereby, allowing the peso to strengthen further.

Standard & Poor's last week raised its outlook on the Philippines to positive from stable, signaling a possible upgrade within the next year. S&P grades the country BB+, a notch below investment grade.

Another trader has concurred pressure on the local currency will persist next year, keeping it strong amid all the good news in the local front.

"Because of the possible upgrade to investment grade and very attractive economic numbers, mukhang mas lalakas pa sa P39 (to $1)," the trader said in a separate phone interview.

"Other developments abroad--specifically in the US and Europe--will also affect trading. But we saw this year na hindi gaano kalakas effect nila dahil fundamentals natin ang tinitingnan," he noted.

The peso hit a 57-month high of P40.85 to $1 last Dec. 6, already a 7% increase from its close of P43.84:$1 in end-2011.

Despite already going back to P41-to-$1 territory, exporters and overseas-Filipino-dependent families have expressed dismay on the rise of the local currency because this makes our exports less competitive than other products in the international market and also cuts the spending power of those dependent on remittances.