Peso slumps to 13-year low of 53.80 vs US dollar

posted September 06, 2018 at 07:35 pm
by  Julito G. Rada
The peso extended its slump Thursday, hitting the lowest level in nearly 13 years at 53.80 against the US dollar, in line with the fall of other Asian currencies and following reports that inflation rate accelerated to a nine-year peak.

The peso shed P0.25 Thursday to close at 53.80 from 53.55 a dollar Wednesday. It was the local currency’s weakest finish in almost 13 years, or since it settled at 53.985 against the greenback on Dec. 7, 2005. 

The peso lost 7.8 percent of its value since the start of the year, making it one of the poorest performing currencies in Asia.

Total volume turnover reached $911 million Thursday, lower than $1.38 billion Wednesday.

Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo remained optimistic of the current level of the peso, saying it could withstand the impact of the surging dollar.

BSP Deputy Governor Diwa Guinigundo
“Yesterday, there was a weakness of regional currencies because of the strong US dollar. There is also higher demand for foreign exchange on the back of higher importations,” Guinigundo said in a news briefing.

Guinigundo said other reasons for the peso’s weakness were the government’s settlement of its foreign debts and companies’ prepayments of their foreign obligations.

“I think we have enough buffers that can support the peso against the US dollar,” Guinigundo said.

Both the peso and the local stocks tumbled Wednesday after the government announced that inflation in August hit 6.4 percent, the fastest in more than nine years.

This brought the average inflation in the first eight months to 4.73 percent, above the official target range of 2 percent to 4 percent for the year.

ING Bank Manila senior economist Joey Cuyegkeng said an extended period of emerging markets risk-off sentiment would keep the peso under pressure. 

“A combination of such inflows, hawkish BSP, and BSP’s direct intervention [also due to additional government foreign denominated bond issuance that keeps FX reserves equivalent to seven

months of imports of goods and services] would be needed to keep the peso from weakening beyond P53.55 area,” Cuyegkeng said.

Philip Wee, foreign exchange strategist of DBS Group Research, said in an earlier report that Asian currencies were facing depreciation pressures because of monetary policy divergences that had supported the US dollar globally.

The US Federal Reserve increased the interest rates in the middle of the year and signaled that more increases were forthcoming.

DBS Bank of Singapore predicted that the peso might depreciate further to 54 per US dollar by the end of the year due to the country’s ballooning trade deficit.

Topics: Philippine Peso , US dollar , Bangko Sentral ng Pilipinas , Deputy Governor Diwa Guinigundo
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