Weak data out of China, Asia’s dominant economic force, pushed down the peso to a new low.
The Philippine peso declined to its lowest level since the middle of 2010 amid worries over the region’s growth prospects, which are tied closely to China’s own performance.
On Tuesday, the local currency opened at 47-to-$1 before closing at 46.93, its lowest level in more than five years. The peso reached an intraday low of 47.04 to $1 before rallying to a high of 46.925 late in the session. Trading volume rose to $623.6 million, up from $569.3 million.
“The recent upheaval in financial markets has shown the sharp reversal in the flow of funds as investors pack up and head back West,” Bank of the Philippine Islands economist Nicholas Mapa said in a note to clients.
Capital flight from emerging markets like the Philippines comes amid the possibility of an increase in interest rates by the US Federal Reserve as early as this month. US Fed rates have stood at record lows since 2008.
Beijing this week reported that China’s exports fell for the second consecutive month in August, raising worries over the Asian giant’s economic health. Moody’s Investor Service on Tuesday said it saw China’s economy growing 6.8 percent this year, slower than 2014’s 24-year low of 7.3 percent.
“The dollar runs roughshod across Asian currencies. [There is] heightened uncertainty over the Fed rate hike and as China struggles to right its floundering economic ship,” BPI’s Mapa said.
Last week, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said the peso’s recent weakness was not “reflective” of the country’s strong macroeconomic fundamentals.
Singapore’s DBS, Southeast Asia’s biggest bank, said market players would focus mainly on the US Fed’s rate increase in the coming days. The Federal Open Market Committee, the American economy’s main monetary policy-setting body, is scheduled to meet on Sept. 17.
“The odds of a surprise Fed rate lift-off at next week’s meeting could not be totally discounted,” DBS said in a note, citing recent improvements in the US job market.