Peso falters to another record low vs US$
The Philippine peso lost 27 centavos to the US dollar, closing at 57.43:$1 on Sept. 16 and falling to a new all-time weakest level for the sixth time in 11 trading days as financial markets’ expectations of rising interest rates heated up.
The local currency opened Friday’s trading at 57.35:$1 while intraday deals ranged from 57.30:$1 to as weak as 57.44:$1—all surpassing the previous day’s close of 57.16:$1.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said that on a weekly basis, the peso was trading weaker against the greenback for the seventh straight week, losing 61 centavos or 1.1 percent.
The peso has lost 6.411 or close to 13 percent to the US dollar since trading at 50.999:$1 at the end of 2021.
The latest week’s showing reflected concerns over the possible outcome of policy rate-setting meetings of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP), both scheduled for next week.
Ricafort said the US Fed was expected to drop another large rate hike of as much as one percentage point, from the current range of 2.25 percent to 2.5 percent.
Higher inflation
Ricafort said such an increase would favor the US dollar in terms of higher interest rate earnings while pushing the peso weaker and Philippine inflation higher. This might then prompt more aggressive BSP policy rate hikes aimed at stabilizing the foreign exchange rate and better managing both inflation and inflation expectations.
Recession
“The peso also weakened after the World Bank warned that the global economy may face a recession in 2022 due to aggressive monetary policy tightening that could still be not enough to bring down elevated inflation,” he added.
ING Bank said markets have continued to push their hawkish bets on the US Fed tightening further, with expectations now putting peak US Fed rates at 4.5 percent instead of the previous 4 percent.
The bank said such expectations have translated to rising yield on US debt paper, making them even more attractive to investors.
