Peso slides past 58 vs $1
The Philippine peso weakened to its lowest level in nearly two months on Thursday, slipping past the 58 mark against the US dollar, as a corruption probe into government flood control projects stirred fresh political unease.
The local currency closed at 58.10, down 63.9 centavos from the previous day and its weakest finish since Aug. 1, according to data from the Bankers Association of the Philippines. Earlier in the session, it touched 58.17 before trimming losses.
Trading was brisk, with $2.1 billion changing hands, compared with $1.7 billion the day before.
The peso’s slide pushed it beyond the Marcos administration’s assumed exchange rate range of 56 to 58 for the year, a level that underpins fiscal forecasts and budget planning.
Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said the peso faces multiple headwinds, from a graft probe into state flood control projects to rising political noise in Indonesia and Thailand that could weigh on regional risk sentiment, as well as lingering global trade tensions.
He noted the currency’s slide past 58 per dollar could signal further weakness ahead.
“The breach of the 58 level puts 58.50 and 59 at risk,” Ravelas said.
A trader shared the same view, saying the peso’s weakness stemmed from “political unrest due to the congressional inquiry on the flood control scandal.”
Cautious US Fed
Over in the West, the US dollar gained ground after Federal Reserve chair Jerome Powell struck a cautious tone on rate cuts, saying the American central bank still needs to balance competing risks of high inflation and a softening job market. A slower easing in the US may put pressure on the peso and other emerging-market currencies, as higher yields keep capital parked in dollar assets.
“The market leaned heavily on a stronger US dollar backdrop,” another trader said. “Firm US data, higher Treasury yields and elevated oil prices combined to fuel safe-haven demand for dollars.”
In a commentary, Arindam Chakraborty, an economist at ANZ Research, said the peso has been an underperformer in the region this quarter even as the Fed resumed its easing run this month, citing the country’s bloated import bill that continues to drive dollar outflows.
“Despite the Fed resuming its rate-cutting cycle, the currency has not been able to strengthen materially this quarter. A key reason for this is likely the large balance of payments deficit incurred by the Philippines this year,” Chakraborty wrote.
“Over the medium term, we expect moderate gains for the peso, as it remains constricted by a wide goods trade deficit,” he added.
