The Philippine peso fell to a new all-time low against the US dollar on Friday as expectations of aggressive US monetary policy tightening boosted the greenback’s appeal.
The local currency lost 1 centavo to close at a new all-time low of 58.5P:$1 from Thursday’s close of 58.49P:$1.
Friday’s close was the fourth consecutive day the peso fell to record lows.
It is also the 10th lowest record low for the Philippine peso-US dollar exchange rate, after previous highs on September 2 (P56.77: $1), September 5 (P56.999: $1) and September 6 September (P57.00:$1), September 8 (P57.18:$1), September 16 (P57.43:$1), September 20 (P57.48:$1), September 21 (P58$1), September 22 (58.49 :$1).
Asked for comment, Rizal Commercial Banking Corp.’s chief economist, Michael Ricafort, said the peso had plunged against its US counterpart “after recent signals from the US Federal Reserve of another rate hike of +0.75 on November 2, 2022; about 1.00 to 1.25 more Fed rate hike for the rest of the year, based on the latest Fed estimates.
Ricafort explained that as the U.S. Federal Reserve aggressively raises interest rates, the attractiveness of the U.S. currency also increases due to “rising interest rate income on U.S. dollar deposits/ fixed income investments/securities”.
Union Bank of the Philippines chief economist Ruben Carlo Asuncion also said the peso is likely to weaken further “as long as the US Fed is in ultra-hawkish mode.”
“It looks like the local tariff adjustments are like blank shots now, and it seems clear that the BSP would like to intervene more in the market,” Asuncion said.
The central bank of the Philippines raised rates on Thursday by 50 basis points effective Friday, September 23 – the overnight repo facility to 4.25%, the overnight deposit facility to 3.75 % and overnight lending facility at 4.75% – as inflation expectations tilt upside.
The latest hike comes after policy tightening of 175 basis points so far this year – 50 basis points in August, 75 basis points in an off-schedule hike in July and 25 basis points each in June and May.
Economist RCBC, meanwhile, said the peso was weaker after the Bangko Sentral ng Pilipinas (BSP) released higher inflation estimates for 2022 at 5.6% from the previous estimate. of 5.4% and for 2023 at 4.1% compared to the previous one. 4% outlook.
Since the start of 2022, the peso has already depreciated by a total of P7.501 or 14.7% from P50.999:$1 at the end of 2021. —NB/VBL, GMA News