The peso strengthened to a three-month high against the US dollar, amid the seasonal increase in remittances for tuition payments and other school-related expenses.
The local currency gained P0.32 to close at 54.93 Wednesday from 55.25 Tuesday. It was the peso’ strongest level since it closed at 54.93 on April 11, 2023.
Data from the Bankers Association of the Philippines showed that value turnover reached $1.36 billion, up from $1.26 billion previously.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the gauge of the US dollar against major global currencies corrected to new two-month lows lately.
“The markets are anticipating some seasonal increase in OFW remittances and conversion to pesos to prepare for some tuition payments and other related expenses for the opening of the new school season, somewhere around July- to August 2023,” Ricafort said.
He said this could be offset by seasonal increase in importation in the third quarter in preparation for the expected rise in local demand and for exports in the fourth quarter.
“The peso also appreciated vs the US dollar ahead of the US CPI/inflation for the month of June 2023 widely expected by the markets to ease further towards 3 percent from 4 percent in May and moving closer to the Fed’s target of 2 percent,” he said.
The interagency Development Budget Coordinating Committee adjusted the peso-dollar exchange rate assumption to a range of 54 to 57 in 2023 and 53 to 57 in the medium term.
Hongkong and Shanghai Banking Corp. also expects the peso to end the year at 54.5 against the greenback amid the loosening monetary policy in the United States.
Fan Cheuk Wan, HSBC chief investment officer for Asia, downplayed in an online briefing the impact of global uncertainties on the strength of the peso going forward.
Fan said she expects the Federal Reserve to increase interest rate by 25 basis points in July.
The peso fell to an all-time low of 59 against the dollar in October 2022 amid expectations that the Fed by that time would raise interest rates.