Philippine Peso goes from Asia's best to worst currency in a week

Manila: The Philippine peso turned into emerging Asia's worst-performing currency in December from being the best, as a seasonal boost from remittances petered out. Strategists see the bearish momentum continuing, Bloomberg reported.

The currency dropped around 2 per cent last week, wiping out all the gains in the first three weeks of December that had made it the regional outperformer. Nomura Holdings Inc and Barclays Plc are among those predicting more losses in the coming months.

The peso faces headwinds from a dovish central bank that left interest rates unchanged last month and signaled it would keep monetary policy accommodative, in contrast to a Federal Reserve set for rate hikes in 2022. It may also come under pressure from a rising current-account deficit. "Peso is likely to be among the laggards in an otherwise higher emerging-markets real-yields world," said Ashish Agrawal, FX and EM macro strategist at Barclays in Singapore. Deterioration in the current-account balance and expectations that the BSP will normalize policy at a slow pace may further weigh on the peso, he said.

The peso climbed almost 2 per cent last quarter through Dec 23, supported by surging remittances and optimism over the economic growth recovery. December remittances are the highest for the year since 2009.

The currency retreated about 6 per cent in 2021 to close at 51 per dollar on Friday. Barclays expects the currency to fall to 51.50 by the end of June, while Nomura sees 51.7 by the end of March. History shows it slid in January in five of the past six years as support from remittances faded.