Weak peso a boon for overseas Filipino workers

BOON. OFWs in Hong Kong remit money to their families in the Philippines as the peso continues to weaken against the US Dollar (file photo).

ANALYSTS forecast the Philippine peso to weaken further this year, advising overseas Filipino workers to take advantage of this trend.

On Mar. 1, the peso closed at P50.28 to the dollar, lower than its previous close of P50.21.

Vic Abola, an economist at the University of Asia & the Pacific, told Hong Kong News that OFWs should make their remittances while the peso is trading at P50 to the US dollar.

Justino Calaycay Jr., head of Marketing & Research at Manila-based A&A Securities, Inc. , said the peso’s depreciation would be good for OFW remittances as this would raise household budgets.

Calaycay estimates the peso to trade between $51 and $53 this year.

“My personal view is that the peso may continue to weaken this year given the near certainty of a US Fed rate hike, improving conditions in the US. Even the movements in oil prices adds pressure

to demand for the greenback,” Calaycay said, adding that policy and governance uncertainties in the Philippines also put pressure to the peso.

Abola, meanwhile, said the reasons for the peso weakness “are not going away any time soon.”

These reasons include the robust economic growth in the US, and the declining current account surplus as the Bangko Sentral ng Pilipinas held the peso to strong levels, causing higher demands

for imports and weakening exports.

The Philippine peso has tumbled to its lowest level at P50.23 to a dollar in more than a decade in February, driven by riskoff sentiment and geopolitical concerns, Bangko Sentral ng Pilipinas governor Amado Tetangco said.

Tetangco said the central bank does not target a specific exchange rate level but is mindful of excessive volatility.

The peso is at its weakest against the greenback since September 2006.

BPI lead economist Jun Neri said the peso could weaken to P50.50 by March and “possibly” to P51 by mid-year, as investors keep close watch on the tightening pace of the Federal Reserve.

Neri said the depreciation remained “modest” and “within a comfortable range.”

Andy Ji, Asian currency strategist for Commonwealth Bank of Australia, said the P50 per dollar level was a key threshold, since the peso had held that level “partly because of official intervention.”

In a research note, analysts at Maybank said there was some market chatter of selling in 10-year Philippine bonds.

Analysts had predicted the peso to lose ground, with the Federal Reserve expected to hike interest rates as many as three times this year.

A weaker peso, however, could result in higher remittances from overseas Filipino workers. The Central Bank has reported a 5-percent growth in OFW remittances last year on the back of a strong dollar, surpassing the government’s 4-percent target.

Remittances in 2016 amounted to $26.9 billion, higher than the $25.61 billion in 2015.