Peso-dollar exchange rate to settle at P42-43, says HSBC

The rapid rally of the Philippine Peso last year which made it the best performing currency in Asia will not be seen this year, according to multinational bank HSBC.

Later this year, the Peso is expected to depreciate further to P43 : $1 before settling at P42 by year-end. HSBC said that rising inflation in the country is a major factor why currency buyers might opt not to select the Peso this year. They are yet to see whether the monetary policy response of the Bangko Sentral ng Pilipinas is appropriate.

HSBC economist Frederic Neumann explained that the Singapore dollar was still rising against the US dollar because its central bank had tightened interest rates aggressively. The Malaysian rupiah is also being bought, despite their central bank having a not so strong monetary response, because its inflation is kept intact because of subsidies.

The P42-43 exchange rate is a far cry from exchange rate predictions of analysts early this year. During the first week of January, we published a collection of predictions on the peso-dollar exchange rate.

“Peso can further appreciate to P37.50 in 2008″
- a report by CitiGroup

“As much as P38.00 by early 2008″
- Michael G. Manuel, CEO of Sun Life of Canada (Philippines)

“Hitting P38.00 is already almost a certainty”
- Ramon Lim, treasurer of Philippine National Bank

“We’re looking at P37.00“
- Roland Avante, Chinatrust Commercial Bank treasurer

“Peso likely to zoom to P35.00-37.00 against the greenback”
- Antonio Agcaoili Jr., Asia United Bank senior vice president

“Peso might break into the P39.00 level but only briefly this year”
- Jose Emmanuel Hilado, chief foreign exchange dealer at Banco de Oro-EPCI

“Peso will rise to P37.00 this year and further to P30.00 next year.”
- BNP Paribas

“Peso at P40.00“
- American Express Bank

“P41.00 is to $1 over the next 12 months”
- Bear Stearns

Only two of the 9 predictions hit the mark. That only proves how unpredictable the market is because even the best financial markets analysts can miss.