Peso to hit 49:$1 if oil prices drop further

January 25, 2019

An analyst of Mauritius-headquartered Alpari Research and Analysis forecasts that the Philippine peso will strengthen to the 49-to-the-greenback level in 2019, if global oil prices decline to around USD42 per barrel.

In an interview by the Philippines News Agency (PNA) Thursday, Alpari Research and Analysis chief Analyst Tomasz Wisniewski said he projects the West Texas Intermediate (WTI) oil price index to retreat to its 2017-2018 low in the first half of this year.

He attributed this projection to expectations of a slowdown in the global economy, which in turn, would lessen demand for oil.

He explained that since the Philippine peso is affected by movements of crude oil prices, with a correlation of around 80 percent, a drop in the global price of this commodity will benefit the local currency.

“We are expecting a global slowdown. If there’s a slowdown appetite for oil is lower so the price should decline,” he said.

Earlier this week, the International Monetary Fund (IMF) cut anew its global growth forecast for this and next year from 3.7 percent for both years to 3.5 percent and 3.6 percent, respectively.

Wisniewski said this development, along with the decision of the Organization of the Petroleum Exporting Countries (OPEC) to cut supply to hike prices “do not bring any positive effect for the price of the oil.”

“So we see the decline of the price of oil in 2019, which should positively affect the peso,” he said.

plus for the local unit is the deceleration of inflation, he said.

After peaking at 6.7 percent last September and October, rate of price increases in the country slowed to 6 percent and 5.1 percent, respectively, in the last two months of 2018.