The peso further weakened against the US dollar Monday, losing P0.08 to close at 47.03 from 46.95 Friday as the exit of Britain from the European Union last week continued to impact on global financial markets.
It was the local currency’s weakest level in almost two months, or since 47.09 to a greenback on May 6, 2016, three days before the presidential elections. Total volume turnover stood at $551 million, lower than $621 million on Friday.
“The weakness of the peso against the dollar was caused mostly by Brexit,” Nicholas Antonio Mapa, research officer of Bank of the Philippine Islands, said in a statement. He said investors continued looking for safe haven currencies, that included the US dollar.
“However, we see the trading to be calm going forward because Britain will not go out of EU outright. There will still be discussions between UK and EU on the existing trade agreements, which deals will be scrapped and maintained,” Mapa said.
Mapa also said he did not see the US Federal Reserve raising interest rates this year and “a delay could be possible.” He said the peso might end the year settling at 49.02 per dollar.
Britain on Friday voted to leave the 28-nation European Union, creating the biggest global financial shock since the 2008 financial crisis.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. earlier predicted more volatility in the domestic markets in the near term. He said monetary authorities would be watching closely the impact to the Philippines “via contagion from moves in the US dollar.”
Britain’s exit from EU added another uncertainty to the peso’s trading path going forward. Experts earlier expected the local currency to face rough sailing in the months ahead due to the imminent interest rates hike by the US Federal Reserve before the year ends.
ING Bank Manila senior economist Joey Cuyegkeng said after the British referendum the Philippines had significant economic policy leeway—monetary and fiscal—to counter adverse global challenges that could result from Brexit.
“We believe that the economy can withstand such external developments. Higher fiscal deficit spending focused on higher infrastructure spending and greater disposable incomes would likely keep Philippine economic growth in the area of 6-7 percent,” Cuyegkeng said.
Bank of the Philippine Islands’ lead economist Emilio Neri Jr. predicted in an earlier report that the peso could hit 50, rather than 45, to a greenback through 2017.
Just recently, the US Fed kept interest rates unchanged but hinted that it could still raise rates for the remainder of 2016.
The peso’s weakest level this year was recorded on Jan. 26 at 47.995. It returned to the 46-a-dollar level on March 4 at 46.945.
Economists from First Metro Investment Corp. and University of Asia and the Pacific earlier projected the peso might trade between 48 and 49 versus the greenback this year, taking into consideration the volatility in the global financial markets.