Peso extends losses, falls past 63.5:$1
The Philippine peso sank to another record low on Thursday, extending its slide despite a larger-than-expected interest rate increase by the Bangko Sentral ng Pilipinas (BSP), as broad US dollar strength continued to weigh on the currency.
The local currency weakened by 15.9 centavos to close at 63.52 per dollar, surpassing the previous record low set in the preceding trading session.
It also touched an intraday low of 63.545, breaking the previous record of 63.373.
Trading volume rose to $1.7 billion from $1.3 billion a day earlier.
The peso’s decline came even as the BSP raised its benchmark interest rate by 50 basis points, an aggressive move aimed at containing mounting inflationary pressures.
“The peso reached another low on growing domestic inflationary concerns,” a trader said. “A 50-bp hike can greatly support the peso, but market forces from US fundamentals might dilute its effect.”
Fresh US inflation data released last week pointed to persistent price pressures, reinforcing expectations that the Federal Reserve may raise interest rates again.
Higher US yields could make dollar-denominated assets more attractive to investors, putting additional pressure on currencies such as the peso.
The Philippines’ heavy reliance on imports has added to the strain, with rising global oil prices linked to the conflict in the Middle East swelling the country’s import bill and sustaining demand for dollars.
Ser Percival Peña-Reyes, a senior research fellow at the Ateneo Center for Economic Research and Development, warned that a slide to 64 per dollar was a realistic near-term risk.
“If oil stays expensive and the dollar strengthens, 64 could be tested within days or weeks,” he said. “Easing geopolitical tensions or a weaker dollar could delay it.”
The peso’s slide has pushed it well beyond the 60-to-62-per-dollar range assumed by the Marcos administration for the year, despite the BSP’s efforts to make domestic investments more attractive through higher interest rates.
BSP Governor Eli Remolona Jr. has said the central bank does not target a particular exchange rate, allowing market forces to determine the peso’s value.
The BSP intervenes only to temper excessive volatility that could fuel inflation, he has said.
“We worry about the big swings in the exchange rate because if the swing is big enough, it becomes inflationary,” Remolona said.
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