Peso continues freefall, from 63-64:$1 in 8 days

MANILA, Philippines — The Philippine peso fell past 64 per dollar for the first time on Tuesday, setting another record low as mounting economic uncertainty and external pressures fueled bets that the currency could weaken further to 65.

The local unit lost 22 centavos to close at 64.17 versus the greenback, data from the Bankers Association of the Philippines. This surpassed the prior all-time low closing of 63.95 set on Monday.The peso touched an intraday low of 64.2 during yesterday’s session. Trading volume rose to $1.7 billion from $1.6 billion previously.

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The local currency breached the 64 level just eight days after breaking the 63 handle.

A trader said the peso could test 65 amid continued market volatility.

“The continued depreciation of the peso is a confluence of domestic macroeconomic concerns and the expected hawkishness from the Fed (Federal Reserve) this week,” the trader added.

The dollar index held near a two-week high on Tuesday as a technology-led rebound in US equities revived risk appetite, Reuters reported. Investors are also bracing for policy decisions from five major central banks this week: the US Fed, European Central Bank, Bank of Japan, Bank of Canada and Reserve Bank of New Zealand.

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Persistently high oil prices have added to inflationary pressures, leaving investors weighing the prospect of further interest rate increases.

Last week, the Bangko Sentral ng Pilipinas (BSP) raised its benchmark interest rate by 50 basis points to 5.5 percent, a larger-than-expected increase aimed at containing stubbornly high inflation.

The central bank expects inflation to average 6.1 percent this year, well above its 3-percent target. It also raised its inflation forecast for 2027 to 6 percent from 5.4 percent, though it expects price growth to ease to 3.3 percent in 2028.

But the peso continued to weaken despite the aggressive rate increase, underscoring the limits of monetary tightening in supporting the currency. BSP Governor Eli Remolona Jr. has reiterated that the central bank intervenes in the foreign exchange market only to temper excessive volatility that could stoke inflation.

Remolona said economic growth could recover by the first quarter of 2027. The Philippines expanded by just 2.6 percent in the first half of this year, weighed down by a major corruption scandal and a war-driven surge in prices.

“This reinforces our view that rate hikes alone may not be enough to reverse the peso’s depreciation,” said Domini Velasquez, chief economist at China Banking Corp. “Ultimately, the key question is how quickly the Philippine economy can recover amid heightened uncertainty.”

Seasonal dollar inflows, particularly remittances in November and December, could offer some support for the peso, Velasquez said. But uncertainty over the pace of the economic recovery appears to be offsetting that seasonal boost.

Ser Percival Peña-Reyes, a senior research fellow at the Ateneo Center for Economic Research and Development, said the peso could weaken to 65 per dollar this week if market pressures intensify, though such a move is far from certain. /atm