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Peso rises on reopening hopes
The Philippine peso has been on the rise in recent weeks, buoyed by hopes of a reopening of the economy and a return to normalcy. The currency has gained strength against the US dollar, with analysts predicting further gains in the coming months.
The COVID-19 pandemic has hit the Philippine economy hard, with strict lockdown measures causing a sharp contraction in GDP. However, with the rollout of vaccines and the easing of restrictions, there is optimism that the worst is behind us.
The peso has been one of the beneficiaries of this optimism, with investors flocking to the currency in anticipation of a rebound in economic activity. The currency has gained around 2% against the US dollar since the start of the year, and analysts predict that it could rise further as the economy recovers.
One factor that is likely to support the peso is the country’s strong external position. The Philippines has a large current account surplus, which means that it is exporting more than it is importing. This has helped to build up the country’s foreign exchange reserves, which currently stand at around $100 billion.
Another factor that could support the peso is the country’s relatively high interest rates. The central bank has kept rates on hold at 2% since November, but there is speculation that it could raise rates later this year if inflationary pressures build.
However, there are also risks to the peso’s outlook. One is the possibility of a resurgence in COVID-19 cases, which could lead to renewed lockdowns and a further contraction in the economy. Another is the potential for political instability, with the upcoming presidential election in 2022 likely to be closely contested.
Despite these risks, the peso’s recent strength is a positive sign for the Philippine economy. It suggests that investors are optimistic about the country’s prospects and are willing to bet on a recovery. If this optimism is borne out, the peso could continue to rise in the coming months, providing a boost to the country’s exporters and investors alike.