Stable forex, stronger peso seen in next few months

The increasing dollar remittances from Overseas Filipino Workers (OFWs) to the Philippines and the growing demand for import volume may push a stable foreign exchange rate and stronger peso in the next few months.

Bangko Sentral Ng Pilipinas (BSP) governor Diwa Guinigundo said as long as there is a balance of trade in inflows and outflows, the peso is seen to settle in a stable manner, except if it is intervened by the unpredictable behavior of oil price in the world market.

Denying strong impression that the BSP has something to do with the strengthening of the peso and has power to maneuver the cost of the peso to a dollar, he maintained that foreign exchange is largely dictated by market movements.

The Philippine foreign exchange is now settling from within P52 to as high as P51 to a dollar in the last few days, he said there is a possibility that stronger peso is expected if the remittance will shoot up, and demand for dollar will weaken.

"We can't craft a forex policy, it is something that is market driven," Guinigundo said.

In the first semester of this year, the Philippine demand for imports have rose bringing the cost of peso to a dollar into stable manner, as it balanced the increasing supply of dollars from the OFWs.

The BSP chief who was in Cebu recently, said demand for import volume posted higher figure due to increasing demand for manufacturing in preparation of the Christmas season.

The improving confidence of the Foreign Direct Investors (FDIs) to invest in the Philippines, and the surging of OFW remittances could further bring up the peso's value to a dollar.

But the further strengthening of the peso could be intervened, if the demand for dollars would increase due to stronger import volume requirement, he said.

Ironically though, for export-based economy like Cebu, peso strengthening is rather bad news, than good news, especially for exporters, and families of OFWs.

Guinigundo however, was careful in his projections, hesitating to answer precise forex behavior in the short term, reiterating that it will depend on the market forces.

Exporters in Cebu, through PhilExport-Cebu recently submitted a position paper to BSP and even met with Guinigundo few months back to seek help in manipulating the peso value to a dollar, as the strong peso would hurt the exporters, and other dollar-earner industries.

Exporters said that if peso would go up beyond P50 to a dollar, or would level to P49, P48 to a dollar, they would be expecting "red light" in the export industry.

Guinigundo, together with BSP monetary board member Juanita Amatong were here in Cebu early this week to grace the Appreciation Lunch and Awarding Ceremony for BSP Stakeholders in Central Visayas.

Also, the BSP top executives launched the "Tulong Barya para Sa Eskwela" program of the BSP to gather the P11 billion worth of coins out in the market, to be given to the Department of Education (DepEd) buffer fund to improve facilities.