Dubai: Surging prices in the Philippines and a spurring speculation of an surprise interest-rate hike is hurting prospects of a stronger peso, but further turning the tides in favour of expat remitters looking to send money back home in the coming weeks.
Against the UAE dirham, the peso is currently at 15.61, depreciating in value by 12 per cent in the year so far. Check the latest forex rates here.
The central bank Bangko Sentral ng Pilipinas may bring forward a planned 75-basis-point rate increase ahead of its policy meeting on November 17, according to Security Bank Corp. and Bank of the Philippine Islands. The nation reported the fastest inflation in almost 14 years on Friday, while the peso posted its largest weekly loss since September.
"There's pressure now for stronger messaging in both monetary and fiscal responses, and even an inter-meeting hike by the monetary side is justified, given upside risks in inflation and the peso," said Robert Dan Roces, chief economist at Security Bank in Manila.
Global central banks are under pressure to defend their currencies as the Federal Reserve prepares to push rates even higher. In the Philippines, the peso weakness is worsening the inflation outlook as the nation imports almost all its oil requirements. BSP is among the few central banks in the world who have given a clear guidance on the rate path, with Governor Felipe Medalla announcing that officials will match the Fed's hike last week.
Goldman Sachs Group Inc. last week raised its policy rate forecast for the Philippines to a new terminal level of 6 per cent from 5.25 per cent previously. The outlook takes into account efforts to curb the currency's weakness and elevated inflation, analysts including Jonathan Sequeira wrote in a note.
BSP last delivered an off-cycle rate hike in July.
"An off-cycle hike will send a strong signal that the central bank is flexible enough to do what is necessary to bring inflation down," said Emilio Neri, lead economist at Bank of the Philippine Islands in Manila. "If we continue to delay, we might end up hiking even much, much more."