Philippine peso to rebound as holiday remittance surge boosts year-end recovery

The Philippine peso is poised to recover from a slide in October with a boost from a seasonal pick up in overseas remittances ahead of the Christmas holidays.

Inflows typically reach their highest level for the year in December, which have helped the peso gain during the final quarter in six of the previous seven years, Bloomberg-compiled data showed. Australia & New Zealand Banking Group forecasts a more than 5% rise in the currency by year-end. The peso is down nearly 4% so far this quarter.
“The peso has a natural strong support every end of the year due to the flood of remittances that come in,” while lower oil prices help ensure a rebound in the currency, said Michael Ricafort, chief economist at Rizal Commercial Banking Corp. in Manila. He expects the peso to gain about 4% by December.

Remittances, which totaled $33.5 billion last year, are among the nation’s largest sources of foreign exchange and may help reverse the peso’s course after a recent slump brought the currency near its all-time low. Any further interest-rate cut by the Federal Reserve would also give the peso a lift.

Lower oil prices will help narrow Philippines’ trade balance as the nation imports almost all its fuel requirements. The local currency rose 0.8% against the dollar to 58.26 on Friday.

To be clear, concerns remain over a resurgent dollar following Donald Trump’s victory in the US presidential race. The president-elect’s policies on immigration may also put future remittances from the US at risk.

But “with inflation in the Philippines under better control, and the balance of payments back in surplus, this should help strengthen the peso into year end,” said Khoon Goh, head of Asia research at ANZ Banking Group, who sees the peso hitting 55.5 per dollar.