The Philippine peso was set to post its third straight weekly fall, hitting a two-month low on Friday, amid growing worries about the new government's economic policies ahead of a presidential election next week. Most other emerging Asian currencies edged down and were poised to report weekly losses on caution ahead of a key US jobs data later in the day.
The peso has slumped 0.8 percent against the dollar so far this week, after depreciating in the previous two weeks. The Philippine currency started the local session at 47.35 per dollar, its weakest since March 1, as investors brace for the vote on Monday. "The key uncertainty over the immediate term is the economic strategy of the incoming president," said Heng Koon How, a senior currency Strategist for Credit Suisse Private Banking Asia Pacific in Singapore.
"Whoever wins the vote will need to present a clear fiscal policy to maintain the high growth rate that the Philippines has enjoyed in the past few years," said Heng. He expected the peso to weaken to 48.00 by the end of 2016. Among candidates, a tough-talking mayor Rodrigo Duterte widened his lead in the last opinion poll. Investors are worried about his lack of clear economic policies.
That added to existing fears that whoever is elected could find it difficult to generate the economic momentum built up during President Benigno Aquino's single six-year term. With such concerns, the peso has fallen 2.6 percent so far this quarter, underperforming regional units. That forced the currency to become the second worst performing Asian currency throughout this year with a 0.5 percent loss. "I previously thought we're already at fully priced-in levels. But seeing the price action and sentiments this week there may be some more to go," said a senior Philippine bank currency trader in Manila, referring to the peso's weakness.
Given its underperformance, the currency could rebound after the election, but only if the new president clears policy uncertainties. "Perhaps investors are too pessimistic on the poll front runner. If he wins and actually does a good job then the PHP has lots of upside potential," said the trader, adding choosing a credible economic team would be an example.
US PAYROLLS EYED Other emerging Asian currencies were on the course to report weekly losses on concerns over slow global growth and tracking the yen's retreat from an 18-month high. Markets were awaiting April US non-farm payrolls amid growing caution that a solid number could escalate possibilities of an US interest rate hike in the near term. Economists expect US payrolls to have risen by 202,000 in April after increasing by 215,000 in March.
Investors only see a 13 percent chance that the US Federal Reserve will raise borrowing costs at its June meeting, according to CME's FedWatch, and a less than 50 percent chance of an increase at every meeting until December. "A positive surprise in US jobs data especially on wage growth may increase market expectations of a Fed hike in June or July," said Christopher Wong, a senior FX strategist for Maybank in Singapore. "That will add to USD strength against Asian FX." Malaysia's ringgit has lost 2.5 percent against the dollar so far this week on sustained concerns over indebted state fund 1Malaysia Development Berhad (1MDB). The finance ministry on Wednesday said it would dissolve the board of advisers at 1MDB and take over its remaining assets in an apparent move to scale down the fund. The South Korean won fell 1.3 percent in the holiday-shortened week as expectations grew of a central bank rate cut on May 13 after the Reserve Bank of Australia slashed rates on Tuesday. Australia's central bank on Friday lowered its inflation forecasts, boosting prospects of more easing. The Singapore dollar has slumped 1.2 percent this week, tracking overall strength in the greenback.