Several Incidences of Philippine Peso Depreciation Seen This 2022

According to DBS Bank Limited of Singapore, the Philippine peso may depreciate further in the coming months this year. Among the views of the analysts from this Singaporean multinational banking and financial services corporation is the official currency of the Philippines decreasing in value to ₱51.50 to US$1 in the second quarter.


We find this foreign exchange-related report important for our followers to read, especially those from the Philippines and readers holding units of the Philippine peso. We believe this news can help them prepare for what lies ahead this 2022.


Based on the Monday, January 10, 2022 report by local daily newspaper The Philippine Star, DBS Bank Limited of Singapore’s analysts said that the Philippine peso might depreciate further to ₱52 to US$1 by this year’s third quarter. 


They pointed out that the currency will then bounce back to ₱51.70 in the fourth quarter of 2022. The Philippine peso stayed above ₱51 to US$1 last week after decreasing in value to approximately ₱50 to US$1 last December.


During that time, the Philippines’ central bank, Bangko Sentral ng Pilipinas or BSP, proclaimed its plans to reduce the reserve requirement ratio amid the rising coronavirus or COVID-19 cases. Then, last week, the Philippine government imposed stricter lockdown measures.


The Philippines’ National Capital Region and adjacent provinces have been placed under Alert Level 3 due to the resurgence of COVID-19 infections following the Christmas and New Year holidays. Alert Level 3 is one of the five COVID-19 Alert Level Systems imposed by the Philippine Government.


It pertains to locations where COVID-19 case counts are high and, or increasing. Moreover, Alert Level 3 is a situation in which hospitals’ total bed and intensive care unit utilization rates are increasing.


From ₱48.023 to US$1 in 2020, the Philippine peso lost grip of ₱2.976 to close 2021 at ₱50.999 to US$1. For the first week of 2022, this official currency of the Philippines weakened by 0.351 centavos against the greenback.


Furthermore, the Philippine peso depreciated by 17 centavos last Friday, January 7 alone to close at ₱51.35 from last Thursday’s ₱51.18 to US$1, following the rapid increase in new COVID-19 daily cases.


The DBS Bank Limited of Singapore’s analysts shared their insights regarding the Philippine peso mentioning the factors like the Philippines’ widening current account shortfall and the United States Federal Reserve System’s hawkish stance.  


Philip Wee is a foreign exchange strategist at DBS Bank Limited of Singapore. He remarked that the door is open for the Philippine currency to weaken to ₱52 to US$1 on monetary policy divergence. 


The Philippines’ current account deficit is likely to widen as the nation continues to recuperate from the COVID-19 pandemic-induced recession, per DBS. Wee stated that more robust domestic demand would widen the current account deficit, although growth would likely become firmer in an election year.


Additionally, the DBS Bank Limited of Singapore official relayed that the Federal Open Market Committee’s minutes should remind markets that the US Federal Reserve System had stopped describing inflation as transitory, signaled three interest rate hikes this year, and doubled the pace of tapering asset purchases.


We think the DBS Bank Limited of Singapore’s analysts’ perspectives are useful for people holding units of the Philippine peso. We recommend the Philippine Government help Filipino farmers, growers, and exporters produce more export products and limit importations. 


Importations weaken the Philippine peso since transactions are in the greenback. In this way, the Philippine peso will become stronger versus the US dollar and the foreseen depreciation incidences will be minimized or eliminated, thereby improving the Philippine economy.

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