USD to PHP Forecast

History of the USD/PHP pair

The US and the Philippines have a long economic and social relationship. After going through a major war between 1899 and 1902, the two countries maintained a cordial relationship over the years and do trade worth billions of dollars.

According to the Trade Department, the Philippines is the 31st goods trading partner of the US, with a total volume being over $18 billion. The USD/PHP cross is classified as a minor pair since the Philippines is not classified as a developed country.

The USD to PHP pair has been traded for many years; however, the Philippine Peso became a free-floating currency in 1993. At the time, the USD/PHP exchange rate was trading at 26.46. The pair has been on an upward trajectory since then and reached a high of 55.9 in 2023.

In other words, the Philippine Peso has crashed by over 100% since 1993 as the dollar dominance has gained. Between its lowest and highest points, the pair has jumped by 151%.

As shown above, the Philippine Peso had a strong run between 2005 and 2008, at the time of the Global Financial Crisis (GFC) and the USD/PHP pair crashed to ~40.

Since then, the pair has done well and has risen by over 46%. This happened because many investors and businesses moved to the US dollar and other foreign currencies like the euro and Swiss franc.

It then jumped during the Covid-19 pandemic as jitters spread in the emerging market and the Philippines economy plunged to $361.75 billion. The economy expanded to $394 billion in 2022 and is expected to remain stable.

Latest USD to PHP forecast

Federal reserve actions

The USD/PHP price had a strong performance in 2022 as the US dollar index (DXY) escalated to the highest level in over 20 years. The greenback surged against most developed and emerging market currencies as the Federal Reserve delivered numerous interest rate hikes.

As America’s inflation reached its peak in over 20 years, the Fed stopped its aggressive quantitative easing (QT) policy and moved to reduce its balance sheet through a quantitative tightening (QT) program. As shown below, the bank’s balance sheet started pulling down in 2022 after peaking at over $8.95 trillion.

The Federal Reserve also started hiking interest rates aggressively. It moved the official cash rate from between 0% and 0.25% to over 4%. In most cases, the US dollar tends to rise when the Fed is aggressively hawkish.

After peaking at 59.2, the USD/PHP pair plunged to a low of 53.6. This ~10% drop happened between October and February 2023. Analysts attribute the drop to the fact that America’s inflation started dropping in July.

The enthusiastic outlook about the Fed waned after the US published strong economic numbers. In February, data showed that the unemployment rate dropped to 3.4%, the lowest in 53 years. At the same time, the headline consumer inflation remained steadily above 6% while retail sales jumped.

Philippines’ inflation and rate hikes

Like other countries, the Philippines went through a rough patch during the Covid-19 pandemic as its GDP crashed and moved into a high-inflation environment. The headline consumer inflation jumped from a low of 0.8% in 2019 and reached its highest of 8.7% in February this year.

The Central Bank of the Philippines (CBP), like the Federal Reserve, has also embraced a tight monetary policy environment in a bid to fight this inflation. It joined other central banks by hiking rates in 2022 from 2% to a high of 6%. In January 2023, it hiked by 0.50% and gave signs of rates slowing down in 2023.

Like other currency pairs, the USD to PHP also reacts to central bank decisions. But in this case, the actions of the Federal Reserve tend to have more weight.

USD/PHP technical analysis

Turning to the weekly chart, we see that the USD to PHP price crashed to a low of 53.65 in January this year. This was the lowest point since June 20 and also along the 50% Fibonacci Retracement level.

The price has been supported by the 200-week moving average and is now a few points above the 50-week moving average. It moved slightly above the 38.2% retracement level and the key level at 54.43, the highest point in September 2018.

Therefore, the pair will likely continue rising in the coming months since the Fed is expected to remain more hawkish than the Philipinnes’s central bank.

Transferring USD to PHP

There is a growing need for sending USD to PHP because of the strong ties between the US and the Philippines. Data shows that the two countries do total goods trade worth over $18 billion. At the same time, service trade is also significant.

Most importantly, the Philippines is one of the biggest receivers of remittance funds from the US. In 2022, the country received over $32 billion, mostly from the United States. There are over 4 million Filipinos in the US and the number is possibly higher.

In addition, Filipinos make a substantial number of people working remotely for foreign companies. These foreign firms pay them using some of the top money transfer companies like Wise and MoneyGram.

Sending USD to PHP is relatively simple and affordable. Some companies provide the service for free and then make money by providing an exchange rate that favours them.

Others provide a favourable exchange rate and a small commission.

Is it a good time to buy USD with PHP?

Historically, we have seen that the USD/PHP pair has been in an upward trend. As such, while historical performance is not always a predictor of future performance, we can assume that the pair will continue rising in the future.

Therefore, with the pair about 10% below its all-time high, it makes sense to buy the USD now. As the technical analysis chart showed, the pair could retest its all-time high in the coming months.

Also, fundamentals are favourable since the Fed is expected to maintain a hawkish tone in the coming months.

USD to PHP 6 month forecast – next 6 months – analysis

The outlook for the USD/PHP pair for the next six months is bullish both from a technical and fundamental perspective.

Fundamentally, there is a high possibility that the Fed will continue hiking rates until June if inflation remains at an elevated level.

In addition, there are still elevated risks of a recession, with the yield curve being inverted. As such, the US dollar tends to do well in a period when there are significant market risks.

From a technical perspective, there is a likelihood that the pair will resume the upward trend as buyers target the all-time high of 59.26.

A bit more about USD to PHP