MUFG Revises Higher USD/PHP Forecasts, Sees Increased Risks Of Intervention
The Japan bank has raised its USD/PHP forecast profile, and sees increased risks of BSP intervention.
MUFG: "We revise up our USDPHP forecasts to 58.20 for 2Q2024, 57.00 for 4Q2024, and 56.50 for 1Q2025 (from 56.00, 55.70 and 55.00 previously).We now think the BSP will delay the 1st policy rate cut to 1Q2025 (from our previous expectation of 3Q2024) to help guard against PHP volatility and given still sticky inflation.
Our forecasts build in the stronger Dollar that our global team expects in the near-term, together with increased left-tail risks of geopolitical conflict, and with that the chance of oil price spikes. However, these negatives are balanced against domestic positives such as rising FDI approvals, a more manageable current account deficit of 2% of GDP, gradual growth improvement, coupled with sticky but still likely within-target inflation through our forecast horizon.
In addition, we think the chance of more aggressive FX intervention by the BSP has risen given concerns around the possible FX pass through to inflation. The 1st levels to watch are likely around 58.00, followed by the 59.00 level. This should also cap the potential spikes to USDPHP moving forward, notwithstanding global risks."