VANCOUVER, BRITISH COLUMBIA — The Philippine peso has dropped past the 45-peso mark against the Canadian dollar. This change gives Filipino workers in Canada more pesos for every dollar they send home, although high prices in the Philippines are cutting into those gains.
The peso closed at P62.625 against the U.S. dollar on Tuesday, September 8, marking a record low in history. The peso first dropped past the P62 mark on August 28. Because the U.S. dollar influences global rates, its strength against the peso has pushed the Canadian dollar above 45 pesos.
Dr. Michael Batu, an economics professor at the University of the Fraser Valley, explained that the Philippine peso is weakening against major currencies because money is flowing out of the country. "This depreciation is driven by a net outflow of foreign currency from the Philippines," said Dr. Batu. “This increased outward flow is primarily caused by surging crude oil prices, rising foreign debt service payments, and higher costs for imported food.”
At the same time, the Canadian dollar has grown stronger due to interest rate expectations and the outlook for inflation. "Higher inflation in Canada can lead investors to expect the Bank of Canada to raise interest rates, making Canadian assets more attractive and increasing demand for the Canadian dollar," Dr. Batu explained.
For Filipino Canadians, a stronger Canadian dollar means more money for their families back home. "Stronger Canadian dollar is generally favourable for Filipino workers in Canada who send money back home," Dr. Batu noted. However, he warned that inflation in the Philippines is taking away much of that benefit due to rising local prices for food, utilities, and rent that offset nominal remittance increases. "While Overseas Filipino Worker (OFW) families are receiving more pesos for every Canadian dollar, some of that benefit is being offset by higher costs of food, transportation, housing, and other necessities," he added.
To manage money wisely right now, Dr. Batu advises workers not to try to guess exchange-rate movements. "I would recommend taking a practical approach rather than trying to speculate on exchange-rate movements," Dr. Batu advised. "Those who need to send money home can certainly benefit from the current favourable rate, but they should also compare the actual exchange rates and fees charged by different remittance services." He also recommended staggering transfers over time rather than sending large amounts all at once.
With the fourth quarter of the year approaching, which is also traditionally the peak season for remittance inflows into the Philippines, questions remain over whether the peso will recover.
Looking ahead to the end of the year, remittance payments usually increase during the holiday season, which could give the peso some temporary support. However, Dr. Batu does not expect this seasonal surge to solve the bigger economic issues. "I would not expect seasonal remittances by themselves to completely reverse the broader forces affecting the Philippine peso," Dr. Batu said.
