Philippine pesos peso bills
A foreign exchange staff counting Philippine peso bills. While the central bank does not regulate bank or retail lending rates per se, it influences lending rates through its policy rate decisions. Image Credit: Bloomberg

Manila: The Philippine peso is on the upswing. The Asian currency appreciated 4.77 per cent against the greenback, from Php58.622 vs $1 on November 7, 2022, to Php55.826 on November 7, 2023.

It strengthened further to Php55.808 on Thursday (November 16, 2023), according to the Reference Exchange Rate Bulletin run by the Philippine central bank, the BSP.

Peso on the rise

Currency traders as well as the country;s economic managers see the Philippine peso gaining further, given the seasonal spike in dollar remittances from overseas.

The Philippine peso, which has been facing challenges, is anticipated to experience a potential strengthening to Php55 per dollar by year-end.

This suggests a projected increase of over 3% from its present value, according to Sunlife of Canada Philippines Inc.

“We see the peso appreciating toward the end of the year due to seasonal inflows such as remittances,” Valerie Pama, chief asset management officer, told Bloomberg on Tuesday. “That will help balance the import demand for dollars.”

In July 2022, the value of the Philippine peso sharply weakened to an 18-year low of Php 56.37 to $1. Throughout that second quarter of 2022, the peso was the weakest in Southeast Asia, as the declining currency stoked public concern on the outlook of the Philippine economy.

In September 2023, one factor that contributes to the Asian currency's weakening is the cooling US inflation which propped up the dollar.

Spike in remittances

MUFG Global Markets Research predicts that while it saw Philippine peso likely to further depreciate in the short term, due in part to the country's substantial current account deficit and the cautious stance of its central bank, the seasonal rise in dollar remittances during the last quarter of the year woud help bouy up its value.

The company echoes the stance of the National Economic Development Authority (Neda) about the effect of expected remittance surge in the fourth quarter, which traditionally saw the peso gaining ground.

Overseas Filipinos' remittances from January to September 2023 rose by 2.8 percent to $27.24 billion, from the $26.49 billion in the same period in 2022, according to BSP data. Dollar remittances rose to $3.23 billion in September, up 2.6 per cent from $3.15 billion a year ago.

OFWs based in the US are the leading source of remittances received in the Philippines. Remittances from the US amounted hit $13.4 billion in 2022, followed by Singapore, with remittances amounting to $2.29 billion.


Still, Trading Economics estimates the dollar-peso pair to trade at 59.40 in 12 months’ time, citing headwinds including inflation, the rate at which the prices of goods and services have risen.

Based on first quarter (Q1) or January-March 2023 average inflation rate, the Philippines has the highest level of inflation in East Asia at 8.3 per cent.

Inflation rate in the Philippines decelerated to 4.90 per cent in October, from 6.10 per cent in September of 2023 — rice inflation soared to 17.9 per cent that month year-on-year — according to the Philippine Statistics Authority (PSA). This brings the 10-month inflation to 6.6 per cent.

In general, elevated inflation rates can erode the comparative worth of a currency, potentially reducing foreign investor confidence as they worry about their investments yielding lower real returns.

The Economy Forecast Agency, meanwhile, sees the USD:PHP rate to hit Php60.18 in March 2024, a 7.26 per cent drop from Php55.808 on November 16, 2023, but is expected to recover to Php55.59 by September 2024, before it slides to Php65.63 vs $1 by December 2025.