Peso falls to new record low of P59 vs US dollar

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THE PESO closed at fresh all-time low of P59 against the US dollar on Monday, amid lingering concerns over inflation.

The local unit dropped 37.5 centavos on Monday from its P58.625 finish on Friday, Bankers Association of the Philippines data showed.

Year to date, the peso has weakened by P8 or 15.6% from its Dec. 31, 2021 close of P51.

Monday marked the 12th time the peso set a new record high this year.

The peso opened Monday’s trading session at P58.75 per dollar. Its intraday best was at P58.72, while its weakest showing was at its close of P59 against the greenback.

Dollars traded dropped to $666 million on Monday from $1.05 billion on Friday.

“The peso closed at the 59-peso level following the higher-than-expected Fed’s inflation gauge for August 2022,” a trader said in an e-mail. 

The US Commerce department said the personal consumption expenditures price index (PCE), the measure by which the US Federal Reserve targets 2% inflation, rose 6.2% year on year in August.

Even before the report’s release, the Fed is widely expected to deliver a fourth straight 75-basis-point (bp) interest rate hike at its next policy meeting in November.

Fed policy makers have hiked the benchmark policy rate by 300 bps since March to a range of 3% to 3.25%, and signaled a continued hawkish stance.

“The peso (was) also weaker as the markets also anticipate the latest Philippine inflation data that could pick up on Oct. 5,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Analysts expect the Philippines’ consumer price index to have peaked anew in September amid the peso depreciation, higher electricity rates, and rising food prices.

A BusinessWorld poll of 13 analysts yielded a median estimate of 6.7% for September headline inflation, within the Philippine central bank’s 6.6-7.4% estimate. This would be faster than the 6.3% seen in August.

It would also be higher than the 2-4% target of the Bangko Sentral ng Pilipinas (BSP) and its 5.6% average forecast for the year.

The Monetary Board has so far raised 225 bps since May to tame inflation.

However, for the trader, the peso may appreciate today (Oct. 4) as expectations of further policy rate hikes by the BSP would boost market sentiment.

The Philippine Statistics Authority (PSA) is scheduled to release the latest consumer price index data on Oct. 5 (Wednesday).

“Peso remains on the backfoot today. Double trouble of a wider current account deficit coupled with financial outflows linked to expectations for a determined Fed are weighing on the peso,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said. 

“Very little that central banks both emerging markets and developed markets can do in the face of this Fed rate hike cycle,” Mr. Mapa said, adding that early and large rate increases have done little to offset the Fed’s aggressive tightening. 

For Tuesday, the trader sees the peso moving between P58.90 and P59, while Mr. Ricafort gave a forecast range of P58.80 to P59 per dollar. — Keisha B. Ta-asan

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