Peso begins to stabilize as remittances start to surge —economists

The peso is now trading at the P53:$1 level from P54:$1 last, a development that may signify that the Philippine currency has started to stabilize, with the seasonal surge of remittances from overseas Filipinos.

The Philippine peso closed at P53.725:$1 Wednesday, the seventh consecutive trading session of it finished at the P53:$1 level.

University of Asia and the Pacific School of Economics Dean Cid Terosa said the peso’s strength may have been driven by the expected surge in remittances in the fourth quarter of the year.

“That’s possible, because historically ... remittances surge in the last quarter of the year, Terosa told GMA News Online.

It is actually signifying an exchange rate stabilization, said independent economic consultant John Paolo Rivera.

"I will call it stabilizing until the rate starts to normalize again,” he said in a separate text message.

All eyes are now on the upcoming holidays.

“Every -ber months, we always expect a more stable peso due to higher levels of remittances (and of course BPO inflows),” Rivera said.

Data from the Bangko Sentral ng Pilipinas (BSP) showed personal remittances reached $21.223 billion in the first nine months of 2018, up 2.4 percent from a year earlier.

Higher remittances are expected in the coming months as the holiday season historically yields more inflows, Rivera noted.

“Remittances from OFWs (overseas Filipino workers) this holiday season will really help mitigate pressure on the currency. Historically, our currency has always been stabilized by remittances,” he said.

Rivera said, however, that the peso must first trade against the dollar at last year’s average trading level of P50:$1 to justify an exchange rate normalization.

An extended period of trading at around P50:$1 would be a normalization of the peso-dollar exchange rate, he said.

At this point though, Rivera said the central bank is on top of the daily foreign exchange foreign exchange fluctuations.

“Of course, BSP will not allow the forex rate to fluctuate uncontrollably because it will hurt our balance of payments,” he said. “It will intervene to stabilize the exchange rate but its effects cannot be felt overnight.”

The Philippine balance of payments (BOP) position reached a $2.696-billion deficit in September.

The BOP consists of the country’s transactions with the rest of the world during a given period. A surplus means more funds entered the country, while a deficit means more funds went out. —VDS, GMA News