The total cash remittances grew by 2.4% year-on-year ( YoY) to $7.771bn in the first quarter this year. The country benefited from access to a steady flow of foreign exchange as foreign remittances from overseas Filipino workers reached $2.888bn in March 2022, up 3.1% from the same time last year, BSP data showed. The Philippines’ central bank chief, Benjamin Diokno, also echoed the sentiment held by FitchRatings.ĭiokno told CNBC in an interview on 9 May that he was “not concerned” about the peso’s recent weakness against the dollar, as the country has a relatively low dependence on foreign debt and a hefty pool of international reserves.
The Philippines government also settled the PHP300bn loan it owed the central bank ahead of the maturity schedule of 11 June 2022.Īn interest rate hike was initially expected to occur in the second half of 2022, but rising inflation and better than expected economic growth rate have expedited BSP’s planned monetary policy tightening.ĭespite a modest weakening of the peso and rising pressure on the goods trade balance in recent months amid higher global energy prices, positive factors such as a gradual reopening of the Philippines’ tourism sector should support the country’s economy.Īdditionally, the country’s “official reserve assets stood at a comfortable $107bn at end-April 2022, only slightly down from $109bn at end-2021”, which will provide credit strength to the country. Interest rates on the overnight deposit and lending facilities were raised to 1.75% and 2.75% respectively. On 18 May, BSP raised the Philippines’ overnight reverse repurchase facility rate by 25 basis points to 2.25%, from its record low of 2.00%. Philippines hikes interest to counter rising inflation However, the recent interest rate hike by the BSP has narrowed the monetary policy gap between the US and Philippines, providing support to the peso.Īre you interested to learn more about the USD/PHP outlook in the near-to-mid term? Read this analysis for the latest forex (FX) news affecting the Philippine peso outlook and analysts’ dollar to peso prediction. The peso is not the only currency weakening against the dollar, as other emerging economies in the region are also exposed to the dollar’s growing strength. In addition, rising US Treasury yields have also diverted investment away from emerging economies, further pressuring the Philippines peso’s value. The diverging monetary policies of the two countries contributed to the peso weakening against the dollar as the latter traded higher. The US Federal Reserve ( Fed) raised interest rates by half a percentage point on 4 May, after its first hike in more than three years on 16 March, when the rate was lifted by 0.25%. In contrast, the US tightened its monetary policies in 2022, raising interest rates and slowing asset purchases to counter the effect of rising inflation. Prior to 18 May, the BSP had maintained a dovish monetary policy and a record low interest rate of 2%, in an attempt to safeguard Philippines’ post-Covid economic recovery. Nonetheless, the USD/PHP rate was 8.8% higher than the same time last year. Following an interest rate hike by Bangko Sentral ng Pilipinas (BSP), the Philippines’ central bank, on 18 May, the peso’s value strengthened against the dollar and was last at 52.37 on 24 May. The USD/PHP exchange rate rose to 53.08 on 9 May, its highest level since 2 November 2018. The US dollar (USD) exchange rate against the Philippine peso (PHP) strengthened over the past month, hitting 3.5-year highs in early May as higher US bond yields diverted investment away from emerging economies. Dollar to peso forecast: Exchange rate hits 3.5-year highs Photo: whiteMocca /
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