Peso sinks to record-low for 10th time in a month

The Philippine peso fell to a new historic low against the US dollar on Friday as expectations of aggressive monetary policy tightening in the United States boosted the allure of the greenback.

The local currency shed 1 centavo to close at a fresh all-time low of P58.5:$1 from Thursday’s finish of P58.49:$1.

Friday’s close was the fourth straight day that the peso fell to record lows.

This is also the 10th record-low for the Philippine peso-US dollar exchange rate, following the previous record-lows on September 2 (P56.77:$1), September 5 (P56.999:$1), September 6 (P57.00:$1), September 8 (P57.18:$1), September 16 (P57.43:$1), September 20 (P57.48:$1), September 21 (P58$1), September 22 (58.49:$1).

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that the peso plunged against its US counterpart “after recent US Federal Reserve signals of another +0.75 rate hike on November 2, 2022; about 1.00-1.25 additional Fed rate hikes for the rest of the year, based on the latest Fed estimates.”

Ricafort explained that as the US Federal Reserve aggressively hikes interest rates, the attractiveness of the American currency also increases due to "higher interest rate income on US dollar deposits/fixed income investments/securities."

Union Bank of the Philippines chief economist Ruben Carlo Asuncion, likewise, said that the peso is expected to weaken further "as long as the US Fed is in ultra hawkish mode."

"It seems that the local rate adjustments are like shooting blanks now, and it seems clear that the BSP would like to intervene in the market more," Asuncion said.

The Philippine central bank on Thursday hiked rates by 50 basis points effective Friday, September 23—the overnight reverse repurchase facility to 4.25%, the overnight deposit facility to 3.75%, and the overnight lending facility to 4.75%—as inflation expectations are tilted to the upside.

The latest hike comes after a policy tightening of 175 basis points so far this year — 50 basis points in August, 75 basis points in an off-schedule hike in July, and 25 basis points each in June and May. 

The RCBC economist, meanwhile, said that the peso was weaker after the release of the higher inflation estimates by the Bangko Sentral ng Pilipinas (BSP) for 2022 at 5.6% from the previous estimate of 5.4% and for 2023 at 4.1% from the previous outlook of 4%.

Since the start of 2022, the peso has already depreciated by a total of P7.501 or 14.7% from P50.999:$1 as of end-2021. —NB/VBL, GMA News