Peso’s long-term outlook strong, says analyst

The peso could slightly weaken toward P57.50 per $1 in the near term amid worries about US President Donald Trump tariffs, a financial market analyst said.

Last Friday, the peso strengthened against the US dollar at P56.97/$1 from $57.35 on Thursday, according to the Bankers Association of the Philippines. However, the Friday level was still weaker than the P56.821/$1 recorded on 4 April.

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said investors will continue to seek US dollars as a protection against huge financial losses.

“The strengthening of the greenback is considered a flight to safe havens,” he said.

However, Ravelas said the peso levels might remain relatively among the strongest in the near future as US President Donald Trump continues to review his tariff policies.

He said the peso will likely appreciate slightly to P56.80/$1 as the US economy is expected to remain resilient. The outlook is lower than the P59 levels seen in November last year when Trump won the US presidency a second time.

“The greenback recently came under pressure after President Trump announced harsher-than-expected tariffs against US trading partners,” Ravelas said.

The International Institute of Finance (IIF) recently reported that central banks around the world continue to rely on the greenback as a resource against possible global economic crises, resulting in a US net foreign liability position of $24 trillion or about 78 percent of that country’s gross domestic product.

“Despite efforts to shift supply chains and curb imports, the trade-weighted dollar index has appreciated by about 4.7 percent over the past year, reinforcing dollar strength amid fiscal and geopolitical uncertainty,” IIF said.

“The foundation of this demand lies in confidence that US obligations will be honored and that fiscal consolidation — however delayed — remains politically and economically viable,” the institute said.

An analysis by S&P Global said Trump’s newly announced 90-day tariff pause for trading partners excluding China signals less drastic movements in the financial markets.

“It demonstrates a willingness to change course in the face of increasing evidence of negative economic and financial fallout,” the global economic researcher said.

“The pain threshold of the President and the US administration appears to be lower than financial markets had feared following the announcement of the reciprocal tariffs on 2 April and the market turbulence that followed,” S&P said.

Special Assistant to the President for Investment and Economic Affairs Secretary Frederick Go last Thursday said the Philippine government expressed willingness to negotiate the 17-percent tariff announced by the White House for the country.

“We’ve reached out to the US Trade Representative and we have communicated with them our desire to engage in a meeting or dialogue, and they have responded positively. So I will be scheduling a trip to the US to meet with the USTR soon,” Go said.

Taiwan’s economy minister said earlier the country has started preparing alternative proposals to US tariffs such as importing more energy from the United States, making it the first country to negotiate over the Trump tariffs, according to a Reuters report.