Peso on a free fall this January

Families of OFWs may celebrate for a while because of the perceived increase in the local value of remittances from their relatives working abroad.  Exporters of local products may also be benefited because Filipino exports may become more competitive abroad.

These are some of the positive consequences of the record slump of the Philippine pesos last Wednesday— P59.44 to the US dollar.

This figure which is very close to the “senior citizen” number of 60 is 9 centavos weaker than the previous number.  It also beats the previous historical record low of P59.355 set last January 7.

This could mean higher inflation rate or increasing prices of basic commodities.  Also, the country’s foreign debt held by the government and private enterprises would inflate because they need more pesos to buy dollars to pay for the loans.

The peso sadly made it at 59.45:$1. Total volume fell to $951 million, from $999.22 million before.

The Bangko Sentral ng Pilipinas (BSP) has signaled it will allow market forces to determine the exchange rate, intervening only if a sustained downturn threatens to fuel imported inflation.

The BSP is willing to absorb some currency weakness as it approaches the conclusion of its pro-growth push. Governor Eli Remolona Jr. last week signaled that the central bank’s easing cycle could end with just one more interest rate cut—possibly in February—unless “bad surprises” emerge that would justify further reductions.

Latest data showed that the US consumer price index had risen by 2.7 percent last month, unchanged from November and in line with expectations. US President Donald Trump has been urging the Federal Reserve to tweak the interest rate but the Fed was widely expected to keep rates steady at its meeting this month.

“The dollar is strong because US growth is holding up; rates are staying higher for longer; and policy uncertainty around the Fed is reinforcing the dollar’s safe-haven appeal,” a trader said.

MUFG Research analysts warned that a renewed rise in global oil prices could weigh on the peso, as higher import costs would intensify dollar outflows in the Philippines, a net oil importer.

With Brent crude trading near $65 a barrel, oil-sensitive Asian currencies have already come under pressure, they said, even as the global oil market remained “fundamentally oversupplied.”

Reaching growth goals for the country has become harder and harder to achieve as economists noted that there is a perceived weakness in foreign direct investments (FDI) together with unresolved issues on corruption and fiscal management.