Peso closes at P55.06, weakest state in 16 yrs

AFTER weeks of depreciation, the local currency crossed the P55 territory on Wednesday—marking its weakest state against the US dollar in more than 16 years.

Data from the Bankers Association of the Philippines (BAP) showed that the local currency opened trade at P54.9 to a dollar on Wednesday, traded at a high of P55.1 to a dollar and a low at P54.88 to a dollar before closing the day’s trade at P55.06 to a dollar. e total traded volume was at $1.28 billion on Wednesday, lower than the $1.65 billion total traded volume on Tuesday.

Wednesday’s peso value was the weakest since October 27, 2005, when it hit P55.08 against the greenback.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said the latest peso exchange rate movements were due to a number of factors, including a “healthy downward correction” in the stock market, and the positive dollar sentiment due to hawkish signals from the Fed.

ING Bank economist Nicholas Mapa, meanwhile, said the peso was also “on the backfoot” given BSP policy dissonance with the

Fed.

“Although BSP has signaled rate hikes are in the pipeline, some investors may be worried that the pace is not quite as fast to quell red-hot inflation and keep pace with the Fed’s projected rate hike schedule,” Mapa said.

“BSP also making mention that they will allow the currency to find its level may have also frayed nerves further,” he added.

Earlier this week, Fitch Solutions said the aggressive path of the United States Federal Reserve is weakening the value of the local currency, and could potentially further shave off value from the peso should the Bangko Sentral ng Pilipinas (BSP) fail to “keep up” with the Fed’s normalization path.

According to the think tank, the BSP’S future moves on its monetary policy will be crucial to the movement of the peso.

“If BSP chooses to stand pat in subsequent meetings, real interest rate differential could narrow and trigger capital outflows, exacerbating downside volatility for the peso,” Fitch Solutions said.

In the BSP’S monetary policy meeting this month, it has hiked its rate by 25 basis points, the second 25 basis point hike for the year.

e next monetary policy meeting of the BSP is scheduled on August 18.