Peso hits record low for fourth straight trading day

The Philippine peso continued its downtrend against its US counterpart on Wednesday, with the hawkish remarks of Federal Reserve officials continuously affecting trading.

The local currency lost 13.5 centavos to close at P57.135:$1 versus Tuesday’s finish of P57.00:$1, which was the previous all-time low. This is the fourth straight trading day that the peso hit record lows.

Sought for comment, ING Bank Manila chief economist Nicholas Antonio Mapa noted that the depreciation of the peso is in line with other regional peers.

“With inflation likely kicking into higher gear as we head for the winter season, central banks have dug into the sand and vowed to snuff out inflation, seemingly at all costs,” he said in an emailed commentary.

Officials of the Federal Reserve have maintained a hawkish stance, with Chair Jerome Powell signaling tight monetary policy “for some time” until inflation is controlled.

Meanwhile in the country, the Bangko Sentral ng Pilipinas (BSP) has raised rates by 50 basis points in August, 75 basis points in an off-schedule hike in July, and 25 basis points each in June and May.

BSP Governor Felipe Medalla has since hinted at the possibility of more policy tightening, saying food supply and petroleum prices would first have to be addressed before a pause can be considered.

“BSP will likely be making cursory appearances to help slow the depreciation trend but it will be difficult to stem the tide completely,” Mapa said.

“The central bank has been aggressive off late in hiking policy rates to defend collapsing interest rate differentials but we know that EM central banks can only do so much to cushion the impact of the impending storm,” he added.

Mapa added, however, that the economy has been "nursed back to life" given months of support from both monetary and fiscal authorities.

“BSP will likely sustain rate hikes in the near term and bank on the reserves it aggressively built up during the pandemic to get through,” he said.

The Philippine dollar reserves dropped below the $100-billion level as of end-July, but Medalla said the reserves remain “comfortable and adequate.” — BM, GMA News