THE PESO could strengthen further against the dollar when trading resumes this week, mainly driven by the seasonal increase in foreign exchange inflows amid the holidays.
The local unit closed at P55.40 per dollar on Friday, gaining 17 centavos from its P55.57 close on Thursday, Bankers Association of the Philippines data showed.
Week on week, the peso appreciated by 25.5 centavos from its P55.655 close on Dec. 15.
The peso opened Friday’s session at P55.35 against the dollar. Its intraday best was at P55.33, while its weakest showing was at P55.435 versus the greenback.
Dollars exchanged rose to $1.083 billion on Friday from $841.25 million on Thursday.
Philippine financial markets were closed on Dec. 25-26 due to non-working days for Christmas.
The peso strengthened on Friday amid the seasonal surge in remittances from overseas Filipino workers (OFWs) to help finance holiday-related spending, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The peso also appreciated as the dollar weakened on Friday after the slower-than-expected US economic growth print in the third quarter, he added.
US gross domestic product (GDP) grew by 4.9% in the third quarter, revised down from the previously reported 5.2%, Reuters reported. However, this was above the 2.1% print in the second quarter and still marked the fastest pace of expansion since the fourth quarter of 2021.
The US economy has been expanding at a pace higher than what officials from the US Federal Reserve regard as the non-inflationary growth rate of around 1.8%.
The slower US GDP print in the third quarter could support Fed rate cuts in 2024, as priced in by markets, Mr. Ricafort said.
The Fed held its target interest rate steady at the 5.25-5.5% range during its December meeting. Since March 2022, the US central bank hiked its target policy rate by 525 basis points (bps).
For this week, the peso may continue to strengthen as remittances continue to rise amid the holiday season, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.
For the first 10 months of 2023, cash remittances increased by 2.8% year on year to $27.49 billion, central bank data showed.
The Bangko Sentral ng Pilipinas expects remittances to grow by 3% this year.
For this week, Mr. Ricafort expects the peso to move between P55.20 and P55.60 per dollar, while Mr. Roces sees the peso ranging from P55.30 to P55.50. — Keisha B. Ta-asan with Reuters