The Philippine peso reached a historic peak against the Emirati dirham on June 26th, 2024, with an exchange rate of 1 Philippine peso for 16.050 dirhams. This is the strongest the peso has ever been compared to the dirham. Dubbed the ‘sweet 16’, this change has stirred mixed reactions among Filipinos—some think it’s a good thing, while others don’t. So, will this shift positively or negatively affect Overseas Filipino Workers (OFWs) and their families back home?
‘More padala, more savings’
With the exchange peaking at PHP16, many OFWs are contemplating how this impacts their remittances. Instinctively, some OFWs see the strong exchange rate as a benefit and take advantage of it by sending more money back home. Some are thrilled about the extra peso in their family’s hands, while others are re-evaluating their remittance strategies.
“I’m considering sending more because the additional amount is significant for my family,” shares Marissa Deligero, a domestic worker in Dubai for 11 years.
For some, this change means more savings in dirhams, which could lead to more funds for investments. “Personally, I take advantage of sending more dirhams towards my monthly installments for the real estate property I bought in the Philippines,” said Cat Carino, an administration manager working in Dubai.
‘Pareho lang’
While others view it as a financial opportunity, others believe that it’s a breakeven situation considering the rising prices of necessities back home.
“The rising exchange rate often correlates with increasing prices of basic commodities back home. While my earnings convert to more pesos, the purchasing power of my family may be compromised. Essentials like food, healthcare, and education become more expensive. So, despite sending more money, its real value decreases,” explains Daisy Caube, an accountant in Dubai for 6 years.
‘Sweet nga ba?’
According to Financial Expert Ben Lebig Jr., who chairs the Association of Registered Financial Planners UAE, the current rate is influenced by several factors, including how the UAE Dirham is pegged to the US Dollar. “Changes in the dollar impact the dirham and the Philippine peso,” said Lebig.
“The recent US interest rate hikes have made the dollar stronger, attracting investments, and making it more valuable compared to the peso. High inflation rates and various geopolitical issues within the Philippines contribute further to the weakening of the Philippine peso,” he added.
As of July 2024, the Philippine peso is trading at around 58.588 PHP per 1 USD.
In a recent press interview, Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. echoed the same sentiment, attributing the peso’s recent performance to the strength of the US dollar rather than a weakness in the peso. He also assured that the central bank is “ready to defend” the currency if necessary, following the peso’s weakest close in nearly 17 months against the dollar in recent months.
‘How do we make it sweet?’
Financial experts believe the ‘sweet 16’ trend may be temporary, advising OFWs to maximize its value by saving more money in the bank and, as Randy Lawrence Ayson, a Certified Public Accountant and an OFW in Dubai suggests, being “aggressive in investments like the stock market and mutual funds.”
They also recommend that OFWs use this opportunity to pay off debts.
“This is a gift that will not last forever, so I strongly suggest our kababayans maximize its value. If you have a loan back home in Philippine pesos, now is the time to increase your payments. With the same amount in dirhams, you can clear a larger portion of your loan. The same goes for peso-denominated investments like installment payments for condos.”
This perspective aligns with Financial Coach and creator of the podcast “Pera and Purpose,” Jay Tolentino. In a previous interview with The Filipino Times titled ‘Is the Peso Weak?’ published in 2022, Tolentino highlighted that a stronger AED/USD allows you to buy more assets denominated in PHP and other weaker currencies if you’re investing globally.
“Most importantly, now is the best time to start investing if you have already paid all your consumer debts, saved enough money for your emergency fund, and bought term life insurance with critical illness and disability cover,” explained Tolentino.
As the ‘sweet 16’ trend unfolds, the key for OFWs and their families is to make informed decisions. Whether it’s taking advantage of favorable exchange rates for remittances, investments, or debt payments, the goal is to ensure that this temporary gift leaves a lasting positive impact on their financial well-being.
