Battered peso extends losing streak, nears 63 vs US dollar
Growing expectations of interest-rate hikes by major central banks strengthened the dollar and weighed on the Philippine peso, which extended its losing streak on Monday and fell to a fresh record low.
The peso fell 18 centavos from its previous close to finish at 62.86 per dollar, surpassing the previous record of 62.68 set on Sept. 11.
The currency touched an intraday low of 62.875 before paring some of its losses.
Trading was subdued, with turnover falling to $969.22 million from $1.1 billion in the previous session.
The decline came as the US dollar held steady against major currencies, with investors weighing the prospect of policy moves by the US Federal Reserve (Fed) and Bank of Japan in a pivotal week for global monetary policy, Reuters reported.
The European Central Bank raised rates last week and signaled that further increases could follow.
Investors increased their bets on a Fed rate hike after data last week showed US inflation accelerating in August. Higher US interest rates could bolster the appeal of dollar-denominated assets, putting further pressure on currencies such as the peso.
“The peso reached new lows after the recent August US inflation solidified views of a Fed rate hike,” a trader said. “Still expecting peso to remain weak due to hawkish expectations.”
At home, the Bangko Sentral ng Pilipinas (BSP) raised its benchmark interest rate by a quarter percentage point last month to 5 percent, its third increase in the current tightening cycle. The central bank described the move as a preemptive response to emerging inflation risks.
Striking distance
Another trader said the 63-per-dollar territory is “clearly within striking distance.”
“But touching 63 is different from staying there,” the trader said. “At these levels, the BSP is likely to be increasingly watchful of any disorderly move, so the bigger question is whether 63 becomes a new trading range or simply another level the market tests.”
In its latest global outlook report, Singapore-based United Overseas Bank Ltd. (UOB) said the peso’s underperformance largely reflected the Philippines’ vulnerability to higher energy prices and supply disruptions because of its dependence on imported oil, as well as uncertainty over the Fed’s policy path.
UOB expects the peso to trade at about 62.9 per dollar in the fourth quarter before recovering slightly to 62.7 in the first quarter of 2027.
The bank expects the BSP to hold interest rates steady in the coming months and maintain that stance for an extended period as policymakers assess the evolving economic outlook.
UOB sees Philippine economic growth underperforming at 3.2 percent this year.
“Looking ahead, we see limited catalysts for a strong recovery in the peso,” UOB said.
