Peso hits new record low vs $1; 62 in sight
The Philippine peso sank further past the 61-per-dollar mark on Wednesday, hitting a fresh record low as a stronger greenback and persistent safe-haven demand—fueled by the war in the Middle East—kept pressure on emerging-market currencies ahead of the US Federal Reserve’s (Fed) next policy decision.
The currency fell 26.7 centavos to close at 61.567 to the dollar, according to data from the Bankers Association of the Philippines, surpassing the previous record low finish of 61.3 set a day earlier. It touched an intraday trough of 61.67 before trimming losses.
Trading volume slipped to $1.6 billion from $1.7 billion as activity in Asia thinned, with markets in Japan closed for a holiday and several major central bank decisions due this week.
The greenback edged higher ahead of the Fed’s announcement, with the US central bank widely expected to keep interest rates unchanged in what could be Chair Jerome Powell’s swan song. Markets are focused on how officials will assess the economic impact of the Middle East war, Reuters reported.
“The peso continued to depreciate on account of a strengthening dollar,” a trader said. “This phenomenon has been bolstered as market participants continue to anticipate a farther timeline before the Fed could resume its cutting cycle which is currently pegged at December 2027.”
“If realized, this will keep US interest rates elevated for longer,” the trader added.
As it is, a weaker peso brings mixed effects.
Remittances from overseas Filipino workers stretch further in peso terms, supporting consumption, while exporters gain price competitiveness.
But the slide risks stoking imported inflation and raising the peso cost of servicing foreign-currency debt.
The latest bout of depreciation came despite the Bangko Sentral ng Pilipinas’ (BSP) decision last week to raise its key rate by a quarter point to 4.5 percent, the first tightening move in more than two years. Officials described the move as “preemptive,” citing a deteriorating inflation outlook as the conflict in the Middle East drags on.
Governor Eli Remolona Jr. has said the central bank would intervene in the spot foreign-exchange market only if the peso’s decline becomes sharp and disorderly, stressing that it does not target a specific level and will allow market forces to determine the exchange rate.
Looking ahead, Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., sees continued pressure on the peso.
“The uncertainty is keeping oil prices elevated and keeping safe haven trade alive,” Ravelas said. “Risk lies at 62 to 62.50 in the near-term.”
A trader said the central bank may mount a stronger defense if the currency weakens beyond the 62 handle. “I’m expecting intervention around that level,” the trader said.
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