HKD/PHP Outlook:
Bearish, with the rate below its recent average, and near recent lows, pressured by specific developments.
Key drivers:
• Rate gap: The Hong Kong Monetary Authority has actively supported the HKD through interventions, while the Philippine central bank has hinted at possible rate cuts, widening the interest rate differential.
• Risk/commodities: The recent fluctuations in oil prices have increased volatility in the HKD, complicating its stability against the PHP.
• One macro factor: The Philippine peso has shown weakness due to government concerns, as indicated by recent comments from the central bank and forecast adjustments by MUFG.
Range:
The HKD/PHP is likely to drift within its recent range, testing the lower end as it remains under pressure.
What could change it:
• Upside risk: A decisive increase in demand for HKD from mainland investors could boost its strength.
• Downside risk: Further weakening of the peso, particularly if rate cuts from the BSP occur, could enhance pressure on the HKD.