THE local currency could still weaken in the coming days as local and international developments could play to the strength of the dollar.
In an analysis published over the weekend, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort cited two main catalysts to the movement of the peso against the dollar for the remainder of the year.
“The expected seasonal increase in importation in third quarter (July-September), in preparation for the expected increase in sales during the holiday season in the fourth quarter (especially US Thanksgiving in November; Christmas/Yuletide in December until New Year celebrations) [is a catalyst],” Ricafort said.
“However, in the fourth quarter the peso exchange rate could be supported by the expected seasonal increase in OFW remittances, export sales proceeds that are converted to pesos especially during the holiday season. These are based on consistent patterns seen in recent years/decades,” he added.
The peso has been on a weakening streak anew in the previous week despite efforts to prop up sentiment against the US dollar.
Data from the Bankers Association of the Philippines (BAP) showed that the local currency closed at P56.77 to a dollar, down from the P56.42 in the previous day’s trade.
While the weaker currency is a threat to the country’s already high local inflation, it is a boon for dollar earners such as migrant workers and people from the Business Process Outsourcing (BPO) industry.
“Weaker local currencies tend to favor export-oriented countries (such as Japan, Thailand, South Korea) that make their exports more price competitive in international markets and increase the local currency equivalent of their export revenues in US dollars,” Ricafort said.
“The new record high for the US dollar/peso exchange rate ironically increases the peso equivalent/proceeds of the US dollars from foreign investors, OFWs, exporters, BPOs, foreign tourists, among others,” he added.
Since the start of September 2022, the peso already weakened vs. the US dollar for the 8th straight month, by 0.625 or 1.1 percent.