When overseas remittances fade, and the country’s current-account deficit weighs, the Philippine peso will have a hard time repeating its strong year-end performance.
Rizal Commercial Banking Corp in Manila has hired Michael Ricafort as its chief economist. According to him, money sent by overseas workers peaks after the year-end vacations. Moreover, the current-account deficit for 2023 is expected to be comparable to the $20.5B seen last year. Risk-sensitive currencies like the peso will suffer if the dollar continues to strengthen. He also said that this quarter’s pair might fall between 55.50 and 56.50.
This week, traders will be watching trade statistics. The latter influence the country’s current account. Economists anticipate the deficit to grow by about a third to $4.5B in November. By the end of March, the Philippine peso will most likely drop slightly to 56.3 versus the dollar, according to analysts surveyed by Bloomberg.
Against the dollar, the peso closed at 55.640 on Friday. In the fourth quarter, on the other hand, it had improved by 5.1%, its best performance since 2010. At the time, there were fewer than half as many rallies for the South Korean won and Japanese yen as there were for Asia’s best-performer currencies.
In December 2021, remittances capped at $3B before falling to $2.7B the following month. According to the most recently available statistics, cash returned from overseas workers totaled $2.9B in October 2022.
The peso’s 200-day moving average and July high have converged, and they are acting to rein in the Asian currency technically. Any upside potential appears limited at best if the peso fails to break through those levels, something it hasn’t been able to do decisively in the last three months.
If US economic numbers spur the Fed to raise rates by 75 basis points this year, as indicated in its dot plot, any expectations of the peso rising further may quickly fade.
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