The peso declined to another seven-year low against the US dollar Friday, pulled down by external factors, particularly the anticipated rate hike by the US Federal Reserve before the year ends.
The local currency lost P0.17 to close at 48.50 from 48.33 Thursday. This was its weakest level since 48.62 on Sept. 4, 2009, at the height of the global financial crisis. Total volume traded stood at $871.8 million, significantly higher than $583.5 million on Wednesday.
“The peso’s weakness was driven mainly by external factors. That is why if you look at the movements in other jurisdictions in Asia, we’d also see a weakening of their currencies,” Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. told reporters at the sidelines of an event.
“At this point in time, there seems to be some risk aversion given again the uncertainty about when the US Fed is going to finally increase interest rates. Judging from the statements of various Fed governors and presidents, there seems to be some splits. Some want to increase and some would want to wait. So that causes some volatilities in financial markets,” Tetangco said.
At the same time, Tetangco said there were some domestic factors that impacted on the peso. He cited the increase in corporate demand for dollars for both fixing and import requirements.
“So together these factors have pushed down exchange rate. But the increase in corporate demand is not negative because it indicates that you are growing and businesses are importing their requirements that they can use for further expansion,” he said.
“I think the volatility will continue until there is a clearer action or decision on the part of the Fed,” Tetangco said.
Bangko Sentral Deputy Governor Diwa Guinigundo said earlier there were many factors affecting the peso and it was very difficult to attribute its weakness to a single event or a statement of any politician.
“But there is something that many economists and policy makers will agree on—and this is the role of global shocks, global factors driving the movement in the financial markets especially the stock market and the foreign exchange market,” Guinigundo said.
“As far as fundamentals are concerned, I think there are outstanding fundamentals but then the sentiment is something else,” Guinigundo said.
Earlier, Rodrigo President Duterte said the United States was manipulating the peso. But Budget Secretary Benjamin Diokno said in a forum on Wednesday that that was not happening, adding the movement of the currency was market-driven.
The Finance Department said that peso remained “very strong” in real terms and the current movement of the local currency would actually help improve the competitiveness of exports and the value of dollar remittances of overseas Filipino workers, which benefits around 40 percent of the domestic economy.
Economists from the 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.