Peso plunges to P43-to-dollar territory as Greece debt crisis worsens

MANILA, Philippines—The peso, moving together with other key Asian currencies, plunged back to the 43-to-a-dollar territory on Wednesday as speculations of Greek politics worsening the eurozone’s debt crisis led to risk aversion globally.

The local currency closed at 43.045 against the US dollar on Wednesday, registering its weakest in about seven weeks. The latest close was down by 38.5 centavos from Tuesday’s finish of 42.66:$1.

Intraday high reached 42.78:$1, while intraday low hit 43.08.

Volume of trade amounted to $932.15 million from $1.057 billion previously.

“There is renewed risk aversion given what is happening in the eurozone. There is much uncertainty resulting from the events in the eurozone, and this caused the steep drop [of the peso],” Jonathan Ravelas, lead market strategist for Banco de Oro, said in a phone interview.

The ruling party in Greece failed to form a coalition government following the elections on May 6, and this led to the need for another round of elections that Greece has been considering to hold next month. Observers said they saw the possibility of an alternative Greek party, a left-leaning one, ruling the next elections, and this has been causing concern Greece might abandon highly unpopular austerity measures that it earlier vowed to observe in exchange for a debt bailout package.

Recent changes in governments in the eurozone, led by that in France, have also caused a cloud of uncertainty in the eurozone, Ravelas said.

“The changes in governments create uncertainty, which is resulting in risk aversion. Consequently, investors are either staying on the sidelines or going for the US dollar for safety,” Ravelas said.

The increase in demand for the US dollar, he said, led to the depreciation of many emerging market currencies, such as the Philippine peso.

On the domestic front, Ravelas said, a mixture of favorable and unfavorable indicators has been contributing to the sentiment favoring a wait-and-see mode.

He said reports that remittances to the Philippines continued to be robust have been seen fueling growth of the economy, but reports of shortfalls in tax collection and risk of faster inflation amid volatile global oil prices have been seen as somewhat dampening overall outlook on the domestic economy.