Peso extends losing streak, hits fresh 19-month low at 58.71:$1

The Philippine peso depreciated against the US dollar for the second straight trading day on Tuesday to carve a fresh 19-month low, ahead of the release of local economic data later this week.

The local currency shed 3 centavos to close at P58.71:$1 from Monday’s finish of P58.68:$1. This is the weakest performance of the peso since November 3, 2022’s finish of P58.80:$1.

Tuesday’s depreciation comes as the Philippine Statistics Authority (PSA) is scheduled to release May inflation data on Wednesday, June 5.

“The US dollar/peso exchange rate went up for the second straight trading day… ahead of the latest inflation data on Wednesday that is expected to slightly pick up after 3.8% in April 2024, as a source of new leads for the local financial markets,” Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said in a mobile message.

The Bangko Sentral ng Pilipinas (BSP) projects could have reached as high as 4.5% in May, faster than the government’s target range of 2.0% to 4.0%. Should this be realized, this would mark the highest in seven months since October 2023’s 4.9%.

Other economic data scheduled for release later this week are the April labor force survey and June trade data on Thursday, June 6, and the April manufacturing figures on Friday, June 7.

“Going forward, the performance of the US dollar/peso exchange rate would partly be a function of intervention/defense as consistently seen over the past 1.5 years,” Ricafort said.

According to BSP governor Eli Remolona Jr., the central bank intervenes in the foreign exchange market when it is “under stress” or when it finds some “dysfunction in the market.”

“When do we intervene? We don’t intervene every day. We intervene when we have to and when we say we have to, it’s when the currency is under stress,” he said.

“Under stress means we find some dysfunction in the market — there’s maybe, when liquidity disappears and then we intervene to provide more liquidity,” he added.

BSP senior assistant governor Iluminada Sicat last week said the recent weakness of the peso is only temporary, as the greenback is buoyed by developments overseas.

The local equities market also bled on Tuesday, as the bellwether PSEi lost 84.32 points or 1.30% to 6,386.42 at the closing bell. The broader All Shares index declined by 32.01 points or 0.92% to 3,439.04.

More than 500.662 million shares, valued at P6.014 billion, changed hands. Decliners led advancers, 128 to 80, while 32 issues were unchanged.

“Philippine shares concluded trading Tuesday in the red following BSP Governor Eli Remolona’s statement about the potential for cutting the benchmark rate ahead of the Federal Reserve,” Regina Capital Development Corp. head of sales Luis Limlingan said in a separate mobile message.

“This suggests ongoing pressure on the PHP against the dollar, given expectations that US rates will remain elevated for a longer period,” he added.

This comes as Remolona on Tuesday said it would be “too aggressive” to cut monetary policy by 150 basis points in two years, given the present growth trajectory.

During the latest monetary policy meeting of the Monetary Board, Remolona said the BSP is now “less hawkish,” as he hinted at the possibility of easing policy rates as early as August. The next meeting is scheduled on June 27, 2024.

At present, rates are at the highest level in 17 years — the target reverse repurchase (RRP) rate at 6.5%, the overnight deposit rate at 6.0%, and the overnight lending facility rate at 7.0%.—LDF, GMA Integrated News