MANILA – Bank of America – Merrill Lynch (BofA-ML) said it sees the peso-US dollar exchange rate hitting P37:$1 by end-2013 on the back of the bullish sentiment on the Philippines given its better growth story.
In its latest research note, the investment bank said all Asian currencies are expected to appreciate further next year with market consensus for no more than a 2-percent climb.
BofA-ML is more bullish on the Philippines, Korea and India, as the investment bank sees their currencies appreciating by 9.4 percent, 9.6 percent and 12 percent, respectively.
The peso was the best annual performer in the past 10 years at 15 percent in spot terms against the US dollar in 2007.
This time, however, it would not be exports receipts that would be driving the currencies in Asia, because of the slow global growth environment, which in turn would inflate current accounts and push up currencies.
Instead, excess funds from markets seeking higher yields, in the form of capital flows and portfolio investments, would fuel Asian forex appreciation.
“We believe the domestic asset market conditions (yield, valuation, and relative growth and inflation characteristics) in India, Korea, and the Philippines will attract the lion’s share of these flows and appreciate most,” BofA-ML said.
By the end of the first quarter, the peso-dollar pair will move to P39.8:$1, then push to P39:$1 by the end of the second quarter. By yearend it would reach P37:$1, the investment bank said.
The Philippine government on Wednesday announced that the country’s gross domestic product grew a better-than-expected 7.1 percent in the third quarter.