Monday, January 19, 2009

Analysts expect peso to weaken, but what do they know?

Well, the analysts all seem to agree: The peso is going to weaken further in 2009. And judging by their forecasting track record, I'd say this almost certainly means that the peso is going to strengthen.

That's a two-year graph of the peso's exchange rate against the dollar-- from January 2007 to January 2009 (thanks Yahoo! Finance).

Take a look back at analyst forecasts for the peso in the past two years and compare it to the actual results in the graph above:
  • Standard Chartered Bank: Peso is also expected to weaken to an average 50 to the dollar this year. (Jan. 2007)
  • Standard Chartered Bank: Peso will weaken in the second quarter due to poor investor sentiments and election anxiety. (Feb. 2007)
  • Valentino Sy: P38 at end-2008. (Oct. 2007)
  • BSP Gov. Amando Tetangco: Peso expected to pick up strength in 2008, hit levels above P40 to the US dollar, probably at P38 to P39 to $1 (Nov. 2007)
  • BNP Paribas has also predicted the peso to rise to 37 this year and further to 30 next year. (Dec. 2007)
  • Ex-BSP Gov. Jose Cuisia Jr. expects the peso to firm up at 38.50-39.00 to the dollar by yearend. (Jan. 2008)
  • JPMorgan: P38.5 by yearend. (Jan. 2008)
  • Citibank: "It will be 35 to $1 by yearend and we’re looking at 39 before the (first) quarter is over" (Feb. 2008)
  • Standard Chartered Bank: Expects the peso to hit P43 against the dollar by yearend
  • Citibank: Projects the peso to end at 45-to-$1 level this year. (Sep. 2008)
God bless them, they do their best with what they have, but to call their forecasts off the mark would be merciful. Not only have these analyst predictions been hit and miss, but more often than not they're just completely incorrect. It's as though reality bends itself just to prove them wrong.

Perhaps one of them should predict that the economic crisis will never end.

And that I will never win a million dollars.