Remittances seen to shield peso from further weakening

The expected influx of cash remittances from Filipinos working and living abroad in December will shield the peso from further weakening before year-end, according to the research arm of Metropolitan Bank and Trust Co.

“If the peso goes beyond the 49:$1 level this month, our year-end forecast will likely be revised above our current 48:$1 level,” Metrobank research analyst Pauline May Ann E. Revillas said, although she added that they also “expect strong remittance flows by December to support the peso and prevent a sharp depreciation, perhaps providing even a strong retracement back to the 48:$1 levels.”

Cash remittances from overseas Filipinos historically peak during the month of December due to the Christmas Day celebrations. For instance, the highest amount of remittances that flowed into the country on a monthly basis was posted in December last year, hitting a record $2.47 billion.

The peso slid to a new low in nearly eight years Wednesday, staying at the weakest level since Dec. 4, 2009’s close of 49.37 to $1. The local currency closed at 49.35 to $1, reversing Tuesday’s slight gain to 49.17:$1.

At the Philippine Dealing System, the peso reached an intraday low of 49.36 to $1 and a high of 49.10 after opening at 49.15. The total volume traded rose to $666.5 million from $600.9 million last Tuesday.

The latest Bangko Sentral ng Pilipinas data showed that as of September, cash remittances already breached the $20-billion mark, a month earlier than it took remittances to reach the same level in the two previous years.

‘Trump tantrum’

However, Revillas said a “volatile” exchange rate should still be expected for the rest of the year mainly on the back of a so-called “Trump tantrum.”

“The global markets remain volatile, with stock markets going in different directions and US bond rates spiking. According to some analysts, last week’s spike in treasury rates alone was so big that it had only happened three times before in the last decade. Stock markets in emerging markets are dropping, while US markets are rallying. The dollar is also on a rally against most emerging market currencies. Most commodities, especially oil, have also slumped,” Revillas noted.

In its weekly outlook, Metrobank said it expected the peso-dollar pair to trade within 48.30-49.30 to $1 this week, with “the BSP present as usual to smoothen volatility.”