Peso falls to 12-year low as inflation accelerates to 9-year high

The Philippine peso fell to a fresh 12-year low on Wednesday, as inflation accelerated to a nine-year high of 6.4 percent.

The local currency lost 1.5 centavos to close at P53.55:$1 from P53.535 Tuesday, its weakest since closing at P53.575:$1 on June 28, 2006.

“Higher inflation led to weaker peso today,” Michael Ricafort, economist at Rizal Commercial Banking Corp., said.

The Philippine Statistics Authority (PSA) earlier on Wednesday reported inflation at 6.4 percent, the fastest in nine years since registering at 6.6 percent in March 2009.

“Higher inflation fundamentally reduces the purchasing power of the peso, thereby increasing the appeal of the US dollar, assuming all other factors are the same,” Ricafort said.

“Other than inflation, the US dollar has been higher vs. major global currencies and weaker EM (emerging market) currencies,” he said.

According to a report by Reuters, the dollar drew strength from “upbeat” US indicators which supported the case for further interest rate hikes by the Federal Reserve.

“Widely expected Fed rate hike also led to stronger US dollar since late last week,” Ricafort noted. —VDS, GMA News