The Peso weakened to a 6-month low to close at P56.83\/USD yesterday in reaction to the heightened Middle East tensions. <\/p>\n\n\n\n
The local currency was the weakest among ASEAN counterparts, down by 0.49% reflecting the country\u2019s vulnerability to higher oil prices. However, the peso is still doing relatively better vs. its regional peers on a year-to-date (YTD) basis — down by only 2.52% during the period.<\/p>\n\n\n\n
While the BSP hasn\u2019t been intervening actively yet, it is closely watching the recent peso weakness due to the risk it poses to inflation outlook in the near term. BSP Governor Remolona sounded hawkish again saying that there\u2019s over 56% chance inflation may exceed the official target this year, thus limiting the scope for rate cuts or even pushing back any rate easing to next year (albeit he ruled out any potential for rate hike at the moment). Recall how the BSP vigorously defended the peso last year from breaching the P57.00\/USD level.<\/p>\n\n\n\n
Our View:<\/strong> There is a positive correlation between the PHP and local equities market Based on our sensitivity analysis, a weaker PHP is generally negative for the Consumer sector<\/strong> and Conglomerates<\/strong> but positive for the Property<\/strong> and Power <\/strong>stocks.<\/p>\n\n\n\n
albeit the degree has somewhat weakened over the recent years. <\/p>\n\n\n\n