Peso closes week at new record low

The Philippine peso closed the week at a new record low, pressured by a resurgent US dollar as expectations grew that the Federal Reserve (Fed) could keep interest rates high this year in response to rising inflation.

The currency weakened by 8.1 centavos from its previous record to finish at 61.721 to the dollar, according to data from the Bankers Association of the Philippines.

It briefly slid to an intraday low of 61.73 before trimming some losses.

Trading volume eased to $1.2 billion from $1.6 billion in the prior session.

The dollar rose more than 1 percent this week, its sharpest gain since early March, as US Treasury yields climbed to one-year highs, Reuters reported.

A trader said US consumer and producer inflation readings released this week reinforced expectations that the Fed may keep borrowing costs elevated for longer, bolstering the greenback amid global risk aversion linked to the Middle East conflict.

Meanwhile, domestic political developments have added to the pressure on the peso.

“Due to challenges in the local fundamentals, the peso might remain relatively weak but occasional central bank intervention could be expected along key levels,” the trader added.

The Middle East conflict could push the Philippine economy toward its weakest growth since the global financial crisis, outside the pandemic, as surging inflation squeezes spending in a nation driven by consumption, Oxford Economics said.

In a research brief, London-based Oxford Economics said it expects average growth this year to hit 3.5 percent, down from its previous estimate of nearly 6 percent.

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Excluding the pandemic slump in 2020, the revised outlook would mark the slowest expansion since 2009, when the Wall Street—centered global financial meltdown and a barrage of typhoons dragged growth down to just 1.4 percent.

Even so, the downgrade would still place the Philippines ahead of several advanced Asian economies, including South Korea (2.5 percent), Singapore (2.3 percent), Australia (2.1 percent) and Japan (0.3 percent). It would also outpace the estimated 1.4-percent growth for Thailand.

But the country would lag faster-growing peers such as Taiwan (9.9 percent), Vietnam (7.2 percent), India (6.2 percent), China (4.6 percent), Malaysia (4.4 percent) and Hong Kong (3.7 percent).

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