The peso will likely weaken in the first quarter of 2023 from the 55-per-dollar level in December that saw seasonally high remittance inflows as Filipinos working overseas sent more money to their families for holiday spending.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said in a reply to a Manila Standard query the peso might average between 56 and 57 against the greenback by the end of the first quarter in 2023.
The peso closed at 55.15 a dollar on Dec. 23 after hitting a record low of 59 in October.
Economists from First Metro Investment Corp. and the University of Asia and the Pacific said in a joint report that while the peso-dollar exchange rate strengthened in November and December, “this will prove unsustainable.”
“And so expect renewed weakening starting Q1 2023,” they said.
The peso lost P4.151 or 8.1 percent of its value this year from 50.999 on the last trading day of 2021.
Ricafort said the local currency’s performance was in line with the movement of other regional currencies such as the Indian rupee, Chinese yuan, Indonesian rupiah, Malaysian ringgit and Thai baht.
He said the still relatively weaker peso in recent months could increase the possibility of further local interest rate hikes amid recent signals from monetary authorities on possibly matching future Fed rate adjustments if inflation remained high.
Ricafort said the more than 8-percent depreciation of the peso against the dollar since the start of the year might have benefitted OFWs and their families, exporters, business process outsourcing, foreign tourism businesses and others that earn in US dollars.
He said any advantage might be offset by higher inflation which hit a new 14-year high of 8 percent in November and could still peak in December. The Philippine Statistics Authority will release the official December inflation in the first week of January.
Data from the Bangko Sentral ng Pilipinas showed that cash remittances in October rose to a three-month high of $2.911 billion, an increase of 3.5 percent from $2.812 billion a year ago, bringing the 10-month tally to $26.736 billion, up 3.1 percent from $25.929 billion a year earlier. The BSP was expecting remittances to rise 4 percent in 2022.
BSP Governor Felipe Medalla earlier said, “the worst is over for the strong dollar.”
The Monetary Board, the policy-making body of the BSP, raised on Dec. 15 the benchmark interest rate by 50 basis points to a more than 14-year high of 5.5 percent to prevent the second-round effects of inflation and support the peso against the dollar. A weak peso exacerbates the impact of imported inflation.
The peso settled at a record low of 59 per US dollar four times in October.