The peso’s recent weakness is encouraging migrant workers to send more money to their families in the Philippines, eager to take advantage of the additional purchasing power the stronger dollar brings.
RCBC Foreign Exchange Corp. president Joseph Colin Rodriguez said the local currency’s depreciation might help offset outflows that had beset domestic financial markets. He said the recent trigger was when the peso crossed the 46-to-$1 level.
“Sub 46, volume was low. People are sending more because of the weaker peso,” Rodriguez said, noting that every remittance dollar now backed a bigger punch.
He said the trend of rising remittances from overseas Filipino workers (OFWs) might also coincide with the normal increase in cash transfers ahead of the yearend holiday season.
OFW remittances are the major source of dollar income for the Philippine economy. Last year, OFWs sent home more than $24 billion, accounting for nearly 10 percent of gross domestic product. Families that rely on these remittances are among the biggest beneficiaries from a dollar that can buy more pesos.
Due to a host of reasons, the peso has lost about 4 percent of its value relative to the greenback since the start of the year.
Last month, Beijing allowed the yuan to depreciate, dragging down other currencies in the process. Foreign exchange traders also have their eyes set on the US Federal Reserve and its plans to raise interest rates for the first time in nearly a decade.
Apart from providing a steady stream of dollar income, remittances also help drive consumer spending, which accounts for two-thirds of domestic output.