US dollar inflows from overseas Filipino workers (OFWs) for the holiday season, along with the country’s robust dollar reserves are expected to back the local currency against further depreciation.
On Wednesday, the local unit weakened to the P59-level against the US dollar after closing at P59.17, but Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort noted that the peso remains resilient.
The peso already closed at this level even three years back, but still managed to regain its footing against the US dollar, strengthening to the P57-level, Ricafort said.
With the seasonal jump in the volume of money being sent home by OFWs during the Christmas season, the local unit is expected to be buoyed by these inflows.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that remittance inflows in December alone are always the highest for the year, reaching more than $3 billion since 2022.
“The start of some Christmas holiday-related spending (is a positive factor for the peso), thereby making it more compelling/attractive for some OFWs and other US dollar earners/owners to convert their US dollars for pesos near the record high,” Ricafort said in a reply to e-mailed questions from the Philippine News Agency on Thursday.
On the BSP intervention to address the peso’s volatility, he said this is expected and is “an effective way to discourage/ease any undue speculation/pressure on the local currency, since the US dollar has become relatively expensive for some importers and other buyers of US dollars recently.”
“Thus, ignoring the BSP factor would be a mistake for those looking for higher levels, as seen with the recent net healthy downward correction of the US dollar/peso exchange rate to 59.17 lately,” he added.
Another positive factor for the peso is the country’s gross international reserves (GIR), which reached $109.7 billion as of end of October.
This level is equivalent to more than seven months’ worth of imports, which is more than twice the international threshold of three to fourth months.
“(This level) could fundamentally provide sufficient buffer/cushion/support/added ammunition/protection for the local currency vs. any undue speculation,” Ricafort said.
PIA PHOTO