THE local currency is poised to gain value against the dollar toward the end of the year on hopes of higher remittances during the holiday season.
Economists at the University of Asia and the Pacific (UA&P) and at First Metro Investments Corp. (FMIC) said in their monthly publication, the Market Call, that the peso will likely benefit from increased dollar inflow toward the country in the latter part of the year.
“We think the peso will trade in a range in October but may have a slight strengthening bias come November and December as overseas Filipino workers [OFWs] pour remittances into the economy for the Christmas holidays,” economists said.
Data from the Bankers Association of the Philippines (BAP) showed that the peso closed trade at P50.7 to a dollar, appreciating from the P50.79 to a dollar in the previous trading day.
The Market Call also noted that the peso-dollar exchange rate weakened further by 0.6 percent in August to an average P50.23 from P49.94 a month earlier.
“This is amidst the renewed strength of the US dollar and the rise of local cases, accompanied by the tightest quarantine restriction regime,” economists said.
Except for the Indonesian rupiah, all the currencies in Asean and East Asia also weakened against the greenback, with the Australian dollar depreciating the most in August.
Earlier this year, Fitch Solutions—the research arm of the Fitch Group.—said the local currency is expected to weaken against the US dollar in the near term, as the country’s pandemic situation affects investor confidence.
“We at Fitch Solutions believe the Philippine peso will trade in a wide range over the near term, given continued uncertainty around the country’s handling of Covid-19, the central bank’s loose monetary policy stance and weakening fundamentals,” Fitch Solutions said.
“The risks in the near term are that the Philippines faces another surge in cases which sets the economy back further and requires policy to remain accommodative for longer, weakening the investors’ appetite for the peso further and seeing the unit test support at P52 to a dollar,” it added.
The peso has largely been relatively strong against the dollar for most of the pandemic. In 2020, the peso ended the year at an average of P49.62 to a dollar, appreciating by about 4.38 percent from the previous year’s P51.8 average.
However, the peso started to depreciate against the dollar in the second half of 2021, with its latest trade value hitting the P50 territory.
The Bangko Sentral ng Pilipinas earlier this year shrugged off worries on the depreciation trend, with BSP chief Benjamin Diokno saying while the local currency is displaying weakness against the dollar, the long-term value of the peso remains stable as per their monitoring.
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