The Philippine peso, which lagged its peers in Asia this quarter, may get a boost in December with millions of Filipinos abroad set to send record amounts of money home to help families suffering from the pandemic and the recent typhoons.
December is a seasonally strong month for the peso, with the currency gaining in the period in five of the past six years. It is also the month when remittances, which totaled more than $30 billion in 2019, reached their highest levels for the year since 2009.
“With increased unemployment as a result of the pandemic and the impact of the typhoons, we expect extra remittances in order to support families at home,” said Wouter van Eijkelenburg, an economist at Rabobank in the Netherlands. “This would support the strength of the peso.”
The peso will edge higher to 48.08 per dollar over the next three months, according to Rabobank. It has risen 0.8% this quarter to 48.10, lagging behind some Asian currencies.
Remittances, the nation’s largest source of foreign exchange after exports, unexpectedly climbed 9.3% in September from a year earlier, the fastest pace in more than two years. That’s despite the repatriation of more than 300,000 workers from abroad who’ve lost their jobs due to the pandemic.
The overall flow of money from workers abroad to the Philippines are estimated to drop by 5% in 2020, taking into consideration those who have returned to the country, according to the World Bank. Still, as the major year-end holidays approach, coupled with the recent typhoons, it is possible that funds to the country will show resilience, said Dilip Ratha, World Bank lead economist on migration and remittances in Washington D.C.
For some, it’s not as though the Philippine currency has overcome all the headwinds. The peso may continue to lag behind regional peers given the Philippine economy is more domestically-oriented and less sensitive to bouts of risk-on from external factors, said Yanxi Tan, a strategist at Malayan Banking Bhd. in Singapore. It also depends on whether the recent tapering in daily virus cases in the Philippines can be sustained, Tan said.
Still, coupled with the remittance support, Oversea-Chinese Banking Corp.’s Terence Wu expects foreign flows to the nation’s stock market will start to pick up as vaccine progress boosts global appetite for risk assets.
“These developments should be positive for the peso going into the year-end,” said Wu, a currency strategist at OCBC in Singapore. — Karl Lester M. Yap/Bloomberg