The peso is expected to appreciate further against the US dollar in the coming days amid the seasonal surge in remittances during the holiday season, coupled with the expected smaller rate hike by the US Federal Reserve this month, an economist said over the weekend.
The peso on Friday posted a nearly four-month high of 55.74 against the greenback, its strongest level since it settled at 55.61 on Aug. 12, 2022.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said in a report that aside from the sustained strength of remittances, the other catalyst for the peso going forward would be the recent signals that local policy rates could partly or fully match the expected rate hike by the Fed on Dec. 14.
Cash remittances rose in September, as global economies that host Filipino overseas workers further reopened, resulting in sustained inflows in the lead-up to the holiday season.
Remittances coursed through banks grew by 3.8 percent to $2.84 billion in September from $2.74 billion in the same month last year.
This brought cash remittances in the first nine months to $23.83 billion, up 3.1 percent from $23.12 billion in the same period last year.
Ricafort said the policy actions of local monetary authorities would “help support and stabilize the peso exchange rate and also help ease overall inflation.”
He said the US dollar corrected lower recently against other currencies amid the improved risk appetite in the US and other financial markets.
He said that since the start of the year, the peso declined by P4.741 or 9.3 percent from 50.999 at the last trading day of 2021. He said the local unit’s year-to-date performance was still similar to other regional currencies such as the Chinese yuan, Indonesian rupiah, Indian rupee, Malaysian ringgit and the Thai baht.
“However, [the] still relatively weaker peso could still increase the possibility of further local policy rate hikes and possibly matching future Fed rate hikes if inflation remains high,” Ricafort said.
The Bangko Sentral ng Pilipinas said last week inflation likely settled within a range of 7.4 percent to 8.2 percent.
The Monetary Board of the BSP raised on Nov. 17 the benchmark policy rate by 75 basis points to a near 14-year high of 5 percent to rein in inflation and support the peso. The peso settled at a record low of 59 per dollar four times in October 2022.