The peso briefly touched P49 to the US dollar on Wednesday, a development attributed to a stronger economy and remittance inflows.
The currency hit an intra-day high of P49.96:$1 — after opening at P50.03:$1 — at the Philippine Dealing System and closed the day at P50.04:$1 — the strongest in six months or since June 19’s P49.91:$1.
The peso gained 10 centavos from Friday, the last trading day before the Christmas holiday.
“The Philippine peso has been supported in recent weeks by strong macroeconomic data as well as seasonal inflows of remittances by Filipino workers abroad,” IHS Markit chief economist Rajiv Biswas told The Manila Times.
The economy expanded by 6.9 percent in the July to September period and year-to-date growth, at 6.7 percent, has kept the country on track to hit the government’s 6.5-7.5 percent target.
Personal remittances, meanwhile, rose to $2.55 billion in October based on latest data, up 9.7 percent year-on-year and recovering from September’s five-month low of $2.44 billion.
Year to date, remittances were up 5.2 percent at $25.71 billion.
The peso’s rally followed a decline in October to an 11-year low of nearly P52 to the dollar. In addition to third quarter growth and remittances, factors said to be supporting the gains include the signing into law of a government-backed tax reform package.
Biswas, however, said the peso could come under renewed pressure next year.
“[I]n 2018, rising United States interest rates are expected to support US dollar appreciation against the peso, while the widening balance of payments deficit of the Philippines will also contribute to peso depreciation against the dollar,” he said.
The country’s 11-month balance of payments position was a $1.78-billion deficit, wider than the $206 million recorded in the same period last year.
The Bangko Sentral ng Pilipinas recently revised its payments balance forecast for this year to a deficit of $1.4 billion from the previous forecast of $500 million.
Key considerations behind the projection are an expected pickup in global growth, a modest recovery in global trade, measured US monetary policy normalization, a brighter outlook for emerging market capital flows, moderate increases in commodity prices, and robust domestic growth.