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Php15!

“One thing in the country’s favor is remittance flows from the 10 million Filipinos working overseas, which typically peak during the Christmas season and may provide an opportunity for the Central Bank to rebuild foreign-exchange reserves from a six-year low.”

DUBAI: The good news for overseas Filipino workers (OFWs) is that analysts are saying the peso-dirham rate, which stood at Php14.80 as of press time, will continue its upward trend and hit Php15, at the earliest, by yearend.

Another good news, they say, is that with Christmas drawing near, OFWs, keeping up with tradition, will once again be sending more than usual for the holidays. This, experts say, will in turn help stabilize the spiraling inflation in the Philippines, which surged to a nine-year high of 6.4% in August 2018.

Php55 to the US dollar

The peso-dollar rate has continuously been going up non-stop in the past months with the peso so far reaching its weakest since 2005 at Php54.22 by end September.

Remittance centers in the UAE are saying the exchange rate will stay the course well into next year.

“Yes, tataas pa yan. We expect that it will even reach a high of Php15 by yearend,” said Kelly Ignacio, business development manager at Ria Money Transfer.

“The signs are there,” said Maynard Enrile, marketing manager for international insurance at Cebuana Lhuillier. “It could reach Php15 by yearend especially now that the peso has not been as strong as it was in the first part of the year and is seen to continuously decline,” he added.

Enrile said the Php15 mark will come “if not by the end of the year, then sigurado by early part of 2019 if things don’t change.”

Screen Shot 2018 09 26 at 8.57.11 PM
Maynard Enrile

Tight fix

“Dere-deretso ang pagtaas ng palitan kasi yung situation sa atin medyo tight,” said Edwin Punzalan, Assistant Vice President for BDO Remittance and BDO Country Manager in the UAE. (The exchange rate continues its upward trend because the situation back home is a little tight.)

Among factors contributing to the peso slump, Punzalan said, is the raging US-China trade war over tariffs and the Federal Reserves’ move to increase interest rates, the third this year of which has been widely reported to be announced this month and the fourth in December.

Higher interest rates attract investors, who consequently put their money in the US instead of in other countries because of better yields. This brings down other countries’ dollar reserves which then results to a weaker local currency as they would have to spend more for their international trading.

“Masyadong nagiging strong ang dolyar. Pati emerging markets na-aapektuhan. Yung peso natin nagiging weak kaya talagang bumabagak,” said Punzalan, adding that the peso-dollar rate could max at Php55 within the year. (The dollar is getting too strong. Even currencies of emerging markets are being affected. Our peso, as a result, is getting really weak; it is really falling.)

The dirham is hinged to the dollar; therefore, a stronger dollar means a corresponding stronger dirham against the peso – and so a higher peso-dirham rate.

Added Enrile: “There are many factors causing the high exchange rate resulting to a combination of a weak peso and an aggressive dollar; it’s a double chaos.”

‘Stay calm it’s the ‘ber months’

Punzalan said there still is a silver lining to all these developments.

“Papasok na ang October, November at December; padalahan na iyan ng mga remittance kaya maraming dolyar ang papasok sa Pilipinas at yung peso magiging strong,” he said. (It will soon be October, November and December – months when OFWs traditionally send more money, and so a lot of dollars will be coming in to the Philippines, which will then help stabilize the peso.)

This, he said, will bring down the inflation rate by way of increased consumer spending which would then “soften” prices of basic commodities.

Edwin Punzalan 1
Edwin Punzalan

“Tumaas ang inflation rate kaya’t ayaw gumastos ng mga tao; mga presyo ng bilihin tumaas kaya nag-wait-and-see sila. Kaya walang masyadong movement ang market kasi walang consumer spending,” Punzalan explained. ((Inflation shot up so people held on to their money not wanting to spend; prices of basic commodities also went up and people took a wait-and-see stance. The market was not moving because there was no consumer spending.)

He said: “OFWs pa rin ang mag-dedeliver nyan.” (It is still the OFWs who will deliver and save the day.)

Added Mo Purple Juachon, senior relationship officer at Al Rostamani Exchange: “October and December are months with high remittance volumes that will help strengthen the peso a little to counter the pending raising of the Fed rate.”

Bloomberg, in a report, echoed this saying “One thing in the country’s favor is remittance flows from the 10 million Filipinos working overseas, which typically peak during the Christmas season and may provide an opportunity for the Central Bank to rebuild foreign-exchange reserves from a six-year low.”

According to the Philippine Central Bank, OFWs around the world sent a total of $16.58 billion from January to July this year.

Tight squeeze

The Philippines was practically in a similar tight squeeze last year with top remittance company officials, citing an exchange rate hovering in the range of Php13.95 to Php 14.04 and a peso-dollar rate of Php 51.79.

What was not in the equation was a spiraling inflation rate.

iStock 836175050

The peso-dirham rate through the years

Jan. 1, 2007- Dh 1 = Php 13.3
• Jan. 1, 2008- Dh 1= Php 11.2
• Jan. 1, 2009- Dh 1= Php 12.96
• Jan. 1, 2010- Dh 1= Php 12.5
• Jan.1, 2011- Dh 1 = Php 11.8
• Jan.1, 2012- Dh 1 = Php 11.9
• Jan.1, 2013- Dh 1 = Php 11.17
• Jan.1, 2014- Dh 1 = Php 12
• Jan.1, 2015- Dh 1 = Php 12.17
• Jan.1, 2016- Dh 1 = Php 12.8
• Jul.3, 2017 -Dh1 = Php 13.77
• Aug. 2017 – Dh 1 = Php 14
• Feb. 2018 – Dh 1 = Php 14.04
• May 26, 2018 – Dh1 = Php 14.30
Sept. 25, 2018 – Dh1 = Php 14.80

Source: Wall Street Exchange and other remittance centers

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