The Philippine peso is expected to sustain its rally against the US dollar in the coming weeks on expected increase in remittances and higher export sales in the fourth quarter, an economist said over the weekend.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said in a report the peso’s weakness in the past months could be attributed partly to the seasonal increase in importation by some manufacturers meant to prepare for the seasonal rise in demand for many businesses in the fourth quarter.
This was exacerbated by the previous expectations that the US Fed might have bigger rate increases which boosted the greenback in the process.
“But the seasonal increase in importation [is] already at the tail-end, before the seasonal increase in OFW remittances and export sales in 4Q that could provide some support for the peso exchange rate especially towards the end of the year, based on the consistent patterns for many years,” Ricafort said.
The Fed is now expected to have smaller rate increases with the easing of inflation in the world’s biggest economy. Economists earlier said the latest 75-basis-point rate hike by the Bangko Sentral ng Pilipinas could support the peso against the dollar.
The peso on Friday closed at 56.67, stronger than 56.78 on Thursday.
Ricafort said the peso strengthened for the ninth straight week, further below the 59-record low posted four times in October.
He said the latest signals that prospective local policy rate hikes could still match any future Fed rate hikes if inflation remained high would help support the peso exchange rate.
President Ferdinand Marcos Jr. earlier signaled the government might have to defend the peso in the coming months through interest rates hike.
Ricafort said the year-to-date performance of the peso was still somewhat similar to other regional currencies such as the Chinese yuan, Indonesian rupiah, Indian rupee, Malaysian ringgit and Thai baht.
The Monetary Board of the Bangko Sentral 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. BSP data showed that the last time the policy interest rate reached 5 percent was February 2009.