AFP FILE PHOTO
MANILA, Philippines — The Philippine peso closed at yet another record low, ending at 58:$1 on Wednesday hours ahead of the announcement of a United States Federal Reserve monetary policy decision that is widely expected to be another large increase in interest rates.
The local currency opened trading at 57.70:$1 which was already weaker than the previous day’s closing of 57.48:$1, and lost 52 centavos to close at the same level as its intraday weakest.
It was the eighth time that the peso sank to a new record low in 14 trading days since hitting 56.77:$1 on Sept. 2.
The US Fed is holding its latest policy meeting on Sept. 20-21, through which the American central bank is widely expected to further raise the benchmark interest rate by 75 basis points (bps) or 0.75 percentage point (ppt).
If this comes to pass, it would be the third 0.75-ppt hike for the US Fed since it started normalization of monetary policy with a 0.25-ppt increase last March.
The continued rise of US interest rates has pushed the American currency at its strongest position in decades as rising yield on US debt instruments jack up demand for the greenback.
“The peso tracked its regional peers as emerging market currencies wilted under a strong US dollar theme,” ING Bank senior Philippines economist Nicholas Mapa said.
“The Bangko Sentral ng Pilipinas is on track to hike 50 basis points [or 0.5 ppt] if the Fed hikes 75 bp but could upsize should the Fed do a 100-bp [one percentage point hike],” Mapa said. “There is very little that emerging market [currencies] can do in the face of a hawkish Fed.”
Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., said the peso has already depreciated by 13.7 percent so far this year, losing P7.001 to the US dollar since closing at 50.999:$1 at the end of 2021.
“For tomorrow [Sept. 22], the peso exchange rate could range at the 57.85 to 58.05 levels,” Ricafort said.
Most of the peso’s losses so far this year happened in the past three months when the peso started depreciating swiftly since hitting 53:$1 on June 10.
“The exchange rate went up for the fifth day in six trading days and again posted a new record high for the second straight day ahead of the widely expected jumbo Fed rate hike,” Ricafort said.
He added that a further increase in the US federal fund rates was also further increasing the attractiveness of the US currency with higher interest rate income on US dollar deposits and debt paper.
“This could lead to higher borrowing and financing costs for some listed companies [in the Philippines],” he said.
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