USD to PHP Price Action Forecast: What to Watch For in 2024?

Robert Adams, an experienced financial expert and analyst at the Traders Union, is the author of this article.

The latest outlook for the USD to PHP exchange rate is marked by persistent volatility, a trend experts anticipate to endure in the short term.

Accordingly, the Philippine peso remains cautious, primarily due to inflation concerns. Following a dovish Federal Reserve, the local central bank plans to retain its benchmark interest rate until stability is achieved in economic expectations.

This article explains the latest price forecasts and signals for the currency pair for a more in-depth understanding.

USD to PHP Price Action in 2023

In 2023, the peso experienced its weakest performance in September, emerging as one of Asia’s least resilient currencies in the third quarter.

According to the Bankers Association of the Philippines, PHP closed at P56.575 against the USD in the third quarter, marking a 2.40% slump from the previous quarter’s finish.

Experts attribute the Q3 decline to stubborn inflation and high borrowing costs. The persistently challenging conditions, such as export restrictions and fare hikes, contributed to upward inflation in the first two months of the quarter.

On the other hand, the US dollar retained its stability after the Federal Reserve signaled a pause for further hikes.

What to Expect?

Traders Union, a respected industry expert, has posted its latest USD to PHP forecast, covering different timeframes based on technical analysis.

Within the 15-minute period, TU experts recommend a buying position, signaling a favorable outlook for short-term trading strategies. However, the 1-hour timeframe reflects a neutral stance, possibly indicating uncertainty.

For traders eyeing longer-term perspectives, the daily and weekly indicators present a strong bearish position, signaling potential depreciation.

Coinciding with this forecast, recent reports indicate that the Philippine peso is on the edge of decline against the US dollar.

Projections point to a potential weakening, with expectations around P58 per dollar from the coming year until 2028, a decline from a range of P53 to P57.

What Influences USD to PHP pair?

The USD to PHP exchange rate is influenced by key factors shaping local and global economic situations.

For instance, inflation, employment, and economic growth play a crucial role in the currency pair. At the same time, the country’s trading balance with primary partners like the United States is another significant factor.

The Philippines typically maintains a modest budget deficit, sometimes turning into a surplus, which reflects on its economic stability. An increase in exports promises more foreign currency, higher gold reserves, and a stronger peso.

However, in recent news, the weakness of the local currency against the US dollar is primarily linked to the expected surge in imports, which is anticipated to intensify demand for the already robust greenback.

In addition, geopolitical factors also have a notable impact due to the country’s heavy reliance on exports. Experts identified the ongoing Israel-Palestine conflict as a potential influencer on the peso, suggesting an upward inflation pressure.

Moreover, analysts highlight the Philippines’ vulnerability to trade tensions between the United States and China due to the nation’s economic dependence on these major economies.

What’s next for USD to PHP?

Forex analysts highlight that future rate hikes by the Philippine central bank depend on factors like inflation data, global economic developments, and the impact of previous elections on government spending.

On a positive note, experts anticipate an economic boost in the last quarter of the year, expecting GDP growth around 5.50% to 6% in 2023.

Despite a 5.90% annual GDP growth in the July-to-September period, the country falls short of its 6 to 7% growth target by the end of the year.

In light of this, the Philippine central bank expressed reservations about the downward trend in inflation, indicating a cautious approach.

Meanwhile, the Fed has explicitly stated its reluctance to reduce interest rates without substantial evidence of an economic slowdown.

In the third quarter report, the world’s largest economy experienced annualized growth, expanding at 4.90%. The momentum is expected to persist, driven by robust consumer spending.

Asian Currencies

Looking at the broader market trends, many Asian currencies are positioned to outperform their counterparts as developed economies witness declining interest rates.

In light of this, analysts anticipate a recovery for the Forex market in 2024 after facing pressure during the global tightening cycle.

Still, the Japanese yen was among the biggest underperformers among major currencies this year due to the ultra-dovish stance of the country’s central bank.

On the other hand, the South Koreans won, and the Indian rupee and the Chinese yuan were plagued by economic concerns.

Explore Alternative Investment: Bitcoin Cash

Beyond the Foreign exchange market, the current bullish momentum in cryptocurrency prices persists, indicating higher investor risk sentiment.

Bitcoin, the king token, sustained its gains from the week amid the expectations of the SEC approval on Spot Bitcoin ETF.

Following the bullish trend, Bitcoin Cash (BCH) has been experiencing a resurgence, following its modest growth this year.

With this, BCH price prediction today on moving averages suggests a bullish sentiment, indicating positive prospects in the daily and weekly timeframe.

Remarkably, experts expected Bitcoin cash to lean towards an uptick over the next 3-7 years, though not without accompanying risks.

Looking Ahead

The USD to PHP currency pair, marked by its high volatility, presents an intriguing yet complex opportunity for investors.

Despite its recent lackluster performance, there is a notable prospect for the Philippine peso to strengthen significantly against the US dollar by more than 25% within a 2-3 year timeframe.

However, this potential upswing is followed by a subsequent devaluation of 50% over the same period. Navigating this requires careful consideration of factors such as the depth of corrections and swap costs, which can escalate to 3 to 5% within 1-2 months.

Consequently, these complexities emphasize the necessity for a strategic and well-informed approach when capitalizing on the potential opportunities within the USD to PHP currency pair.

Furthermore, investors must weigh the risks and rewards, taking into account important considerations in the market.