Philippine Peso Strengthens Against US Dollar

The Philippine Peso is projected to continue appreciating against the US Dollar in the forthcoming months, according to the chief economist at Rizal Commercial Banking Corp., Michael Ricafort. This is particularly expected if inflation in the United States maintains its course of easing, which could prompt interest rate cuts by the Federal Reserve.

In a recent commentary, Ricafort pointed to the potential benefits of a reduction in the Federal Reserve's rates. “Should the US inflation align with the Fed's target of 2 percent at the earliest by the close of this year, this could ultimately justify and pave the way for the commencement of Fed rate cuts, particularly into 2024,” explained Ricafort.

He further noted that any reduction in the Federal Reserve's rate could be reciprocated locally in the Philippines. Such a development, he said, would be a significant positive catalyst for both global and local financial markets in the upcoming months.

US inflation for June 2023 has continued to decline, reaching a two-year low of 3 percent from the previous 4 percent in May 2023. This decline indicates that US inflation is inching closer to the Federal Reserve's target of 2 percent, as noted by Ricafort.

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News 2023-07-17

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Meanwhile, the Philippine Peso has been experiencing steady gains against the US Dollar. On Friday, the Peso reached a fresh three-month high, strengthening to P54.4 from P54.51 on the previous day, making it the strongest since April 5, 2023, when it was also at P54.4.

Since the onset of 2023, the Philippine Peso has appreciated by a significant 2.4 percent to P54.4 as of July 14, up from P55.76 at the end of 2022. This trend has sparked optimism for further appreciation in the coming months.

The Interagency Development Budget Coordinating Committee, last monthly, adjusted the peso-dollar exchange rate assumption for 2023 to P54 to P57. The rate is expected to remain broadly stable at P53 to P57 for the remainder of the medium term.

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. also noted that the Monetary Board may opt to reduce the key interest rates before 2023 ends if inflation falls to 4 percent, the upper threshold of the target range.

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