HKD/PHP Outlook: Slightly weaker, but likely to move sideways, as the rate is just below its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Hong Kong Monetary Authority's interventions have created a significant interest rate differential, promoting carry trades that have weakened the HKD against the PHP.
• Risk/commodities: Oil prices are showing recent volatility, potentially impacting the peso further as the Philippines is a net importer of crude.
• Macro factor: Market expectations about the Bangko Sentral ng Pilipinas allowing the peso to weaken are influenced by comments from the central bank, indicating a hands-off approach to exchange rate levels.
Range: The HKD/PHP is likely to hold within its recent range as it stabilizes after recent fluctuations.
What could change it:
• Upside risk: A surprising increase in foreign investment or increased demand for HKD owing to favorable equity performance could strengthen the HKD.
• Downside risk: If the Philippine central bank proceeds with anticipated interest rate cuts, this could pressure the peso further, impacting the HKD/PHP rate negatively.
