PRIVATE ENTERPRISES expect the peso to appreciate further in the fourth quarter amid projections of sustained increase in dollar inflow to the Philippines.

This was according to a study by the Bangko Sentral ng Pilipinas, which solicited the views of over 1,200 firms nationwide.

The peso outlook index for the fourth quarter, measured as the difference between firms that expect the local currency to appreciate and those that expect it to depreciate, stood at +24.7 percent.

This means more firms see the peso strengthening in the last three months of the year versus the third quarter.

The peso currently hovers at 45:$1, stronger than last year?s average of 47 against the dollar.

?The anticipated appreciation of the peso [is attributed to the] sustained foreign exchange inflow arising from the improved performance of exports, steady OF [overseas Filipino] remittances and foreign direct and portfolio investments,? the BSP said in the paper.

A stronger peso benefits firms that depend on imported raw materials for their production or purchases imported goods for sale to the domestic market.

A strong peso, however, adversely affects income of exporters as it makes Philippine-made goods more expensive in dollar terms.

Monetary officials said the appreciation of the local currency was largely due to rising remittances from Filipinos based offshore and modest rise in foreign investments.

In June, monthly remittances hit a record high of $1.62 billion, bringing the total for the first half to $9.06 billion, up 6.9 percent from only $8.48 billion in the same period last year.

Also, in the first seven months of the year, net inflow of foreign portfolio investments hit $701 million, up by over 160 percent from $265 million in the same period a year ago. Gross inflow reached $5 billion, up from only $3.6 billion in the same period a year ago.

Central bank officials also said that while the appreciation of the peso puts exporters at a disadvantage, the overall outlook of the country?s business sector is still positive for 2010. This is because the rising remittances are expected to buoy consumption of remittance-dependent households, and that increasing consumption bodes well for profitability of firms.