Philippine peso weakens to new historic low of P59.355 to dollar

MANILA, January 8 ------ The Philippine peso hit yet another historic low on Wednesday as the local currency weakened to P59.355 versus the US dollar. The peso opened at P59.24 to the dollar, which was already weaker than the previous historic low of P59.22 hit on December 9 last year. It further weakened during the day, hitting as low as P59.38 during intraday trading.

An influx of remittances from overseas Filipinos helped the peso regain ground in December, keeping the local currency in the P58-to-the-dollar range. But with the holidays over, the peso has again been losing ground. An analyst, however, has downplayed concerns that the weak peso will have an adverse impact on the economy. HSBC Economist Aris Dacanay said most businesses have already factored in an exchange rate of up to P60 to the dollar in their plans for the year.

Dacanay said the peso depreciation is unlikely to trigger inflation, and that the weaker peso may even benefit the country's BPO sector. "I've been highlighting over the past interviews that the Philippine BPO sector, our number one most tradable sector, has been losing market share against India because India's currency has been depreciating by quite a lot. So the Philippine [peso] depreciating makes the peso more competitive, which makes the BPO sector more competitive," said Aris Dacanay, an economist at HSBC.

Aside from the BPO sector, families of OFWs also stand to benefit as they stand to get more pesos for the dollars remitted by their loved ones abroad. "So I would actually argue that for OFWs who have children in the Philippines, it'll actually be very easy; it'll be easier for them to pay for their tuition rates," he said. "So as we all know, the first or second half of the semester of the academic year in the Philippines will start in mid-January. So a lot of these families will need to pay the tuition for the upcoming academic year," Dacanay added.

A further weakening of the peso beyond P60-to-the-dollar, however, is unlikely, Dacanay said. "I don't think the peso will breach 60 because we do think that the current account will drastically improve by this year. How so? The AI boom that is currently ongoing in the world will likely boost Philippine exports, mainly because 60 percent of our goods exports are electronics and are fueling the data centers that are being invested, that are being built all around the world," Dacanay said. He added that the slowdown in infrastructure spending in the Philippines will likely dampen import demand for cement, metals, and vehicles. Dacanay said that with consumption stabilizing, households increasing their saving rates, exports increasing and imports decreasing, the Philippines' current account will improve and support the pesos "most especially at the 60 [to the dollar] space."

Source: news.abs-cbn.com