Philippine peso was seen gaining strength against the US dollar as remittances continue to pour in large volume in the remaining days of the year.
“We expect the peso to continue to, likewise, trade at a tight range, with a bias for further appreciation ahead of the Bangko Sentral ng Pilipinas [BSP] meeting, and as investors start to secure their positions,” before the year ends, according to BPI Asset Management, the wealth-management arm of the Bank of the Philippine Islands.
It said peso bucked the regional trend and gained on the dollar, buoyed by strong remittances and capital flows into the local fixed income market.
“The Philippine peso posted strong gains during the week as remittances started to come in. Moreover, the positive spread offered by local government securities over US treasuries has encouraged investors to increase their allocation in the Philippines,” BPI Asset Management analysts said.
The Philippine peso appreciated against the greenback by 0.79 percent, week-on-week to close at 44.54 on Friday.
Week-on-week, the US dollar strengthened against major currencies as the slump in oil and other commodity prices urged investors to flock to the dollar.
The euro declined 0.66 percent against the US dollar, further dampened by the disappointing data releases from the region, while the yen slumped 1.36 percent, relative to the dollar for the week.
The BSP reported the country’s gross international reserves (GIR) totaled $79 billion in November, lower by $400 million than the previous month, primarily because of fewer gains from the foreign-exchange operations by BSP, payments for maturing foreign-exchange obligations of the government, and revaluation adjustments in the central bank’s gold holdings and foreign reserves.
Moreover, the November GIR can cover nearly 11 months worth of imports of goods and payments of services and income.
“Major central banks are currently on a wait-and-see stance as they try to gauge the impact of depressed oil prices on inflation and, as they assess how their respective economies will respond to the aggressive stimulus measures announced the previous months,” the researchers said.
The US Federal Reserve, which is slated to convene on December 16 and 17, is expected to not make any major announcement with regard to its future monetary-policy move and highlight the impact of the strong dollar, weak oil prices and dampened global-growth outlook on its economy.
Major upcoming data releases over the weekend are the non-farm payrolls and unemployment figures.