Peso falls to 12-year low
The peso fell to its weakest level in 12 years on Wednesday as traders digested dovish statements of Bangko Sentral ng Pilipinas officials that made financial markets uncertain about another interest rate hike next week to help cap local consumer prices.
At the same time, investors also unloaded pesos and shifted to the dollar ahead of the outcome of a US Federal Reserve meeting where markets expect the world’s most influential central bank to raise its own interest rates for the second time this year.
The peso opened the June 13 trading session weaker at P53 to a dollar, from the previous trading session’s close of P52.887.
It dropped to as low as P53.26 in afternoon trading before closing the session at P53.23. This was its weakest since June 29, 2006, when the currency hit P53.55 to a dollar.
Total volume was heavy with $773.17 million changing hands, compared to last Monday’s volume of $653.1 million.
BDO Unibank chief strategist Jonas Ravelas said the peso’s weakness was due to the “prospects of a rate hike in the US this week” as well as the weaker trade data released by the government last week.
Higher interest rates in the US make dollar-denominated investments more attractive to fund managers compared to peso-denominated securities.