Peso sinks to 58.95 vs $1: OFW families get more for each dollar sent home
Philippine currency snaps short-lived run as rallying dollar overpowers most currencies
Manila: Overseas Filipino Workers (OFWs) could enjoy a virtual pay raise as the peso sank on Thursday, allowing them to get more in local currency for every dollar sent home.
This can increase household spending, potentially boosting domestic consumption.
The Philippine peso sank to its lowest level in two years to close at Php58.95 against the US dollar on Thursday (December 19, 2024), according to Bangko Sentral ng Pilipinas (BSP) data.
It’s just a centavo away from the record-low Php59.05 and a 5.6 per cent drop from year-ago level of Php55.819 vs $1 (on December 23, 2023), as per BSP’s Markets Reference Exchange Rate Bulletin.
The peso hits its record low of Php59.05:$1 on October 9, 2022.
The Philippine currency briefly appreciated in recent days, but it was a short-lived run as the rallying dollar overpowered it, drawing strength from recent market and geopolitical developments.
Data showed this was the peso’s weakest close in 26 months.
Dollar strengthens
The strong dollar continued to enjoy inflows amid new post-election developments in the United States.
The US Federal Reserve announced Wednesday a modest 25-basis-points policy rate cut, its third since the pandemic, but with fewer rate cuts expected in 2025.
The US dollar has regained almost all the ground it lost against a basket of global currencies, as president-elect Donald Trump has threatened sanctions on countries that would try to undercut the mighty greenback.
What a weaker peso means
A weaker currency means locally-made goods and services become cheaper for foreign buyers, which can boost demand for exports such as electronics, garments, and BPO services.
But it may also lead to inflationary pressures and increased costs for imports and debt servicing.
At the same time, the BSP might intervene in the foreign exchange market or adjust interest rates to stabilise the peso and control inflation.
The net effect, however, depends on how the government, including the BSP, and private sector manage these dynamics.