Peso sinks to record low of P56.77 vs. US dollar

The Philippine peso hit a new all-time low against the US dollar on Friday as the greenback rallied amid a hawkish US Federal Reserve.

The local currency lost 35 centavos from Thursday’s finish of P56.42:$1 to close at P56.77:$1 on Friday.

This is a new record low for the local unit, surpassing the earlier all-time low of P56.45:$1 on October 14, 2004.

The peso also registered an intraday low of P56.90 before closing at P56.77.

The local currency has shed P5.771 or 11.3% since the start of 2022, against the P50.999:$1 as of end-2021.

Rizal Commercial Banking Corp. chief economist Michael Ricafort attributed the local unit’s weakness to "the stronger US dollar versus major global currencies and the benchmark 10-year US Treasury yield at a new two-month high of 3.25% amid more hawkish Fed signals recently to bring down elevated inflation."

Reuters reported on Wednesday that Fed chair Jerome Powell's hawkish remarks about keeping monetary policy tight "for some time" dashed hopes of more modest interest rate hikes.

Ricafort said the next resistance for the peso is the "psychological" P57.00:$1.

Locally, the Bangko Sentral ng Pilipinas has been signaling further policy tightening to tame inflation.

Interest rates are among the tools used by central banks to stabilize inflation through controlling the money supply by raising borrowing costs.

Higher borrowing costs could make consumers and businesses spend less, thereby reducing economic activity or lowering demand and eventually lowering prices. —VBL, GMA News