The peso retreated again to an all-time low of 59 per US dollar Monday after a week of flirting near that level as the greenback gained general strength amid financial markets’ expectation of another huge rate increase by the US Federal Reserve next month.
The peso weakened from Friday’s closing of 58.625. Trading volume reached $666.7 million, down from $1.058 billion on Friday.
“The US dollar/peso exchange rate corrected…today [after declining for straight trading days], by +0.375 or +0.6 percent to close at a new record…of 59.00, matching the intraday record…of 59.00 posted on Sept. 28 and 29, 2022,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said in an emailed message.
Ricafort said the dollar’s strength was due to the continued hawkish signals from Fed officials.
“The peso is also weaker as the markets also anticipate the latest Philippine inflation data that could pick up on Oct. 5, 2022,” Ricafort said.
The Bangko Sentral ng Pilipinas said Friday inflation in September likely accelerated to as high as 7.4 percent from 6.3 percent in August on higher food and electricity prices and weaker peso.
Inflation in August 2022 slightly eased to 6.3 percent from 6.4 percent in July.
“The peso also [is] weaker after after global crude oil prices corrected higher to one-week highs; after Russia’s irreversible annexation of four occupied Ukraine regions that could complicate the Russia-Ukraine war,” said Ricafort.
Global crude oil prices lingered near 9-month lows or since early January 2022 before Monday’s closing.
Ricafort said the weaker peso could increase the possibility of further local policy rate hike/s and more intervention in the local foreign exchange market.
He said the peso depreciated by a total P8.00 or 15.7 percent from 50.999 in end-2021.
“This could lead to higher prices of imports and overall inflation, thereby would increase the possibility of further local policy rate hikes, even a surprise/off-cycle local policy rate hike to help stabilize the peso as well as overall inflation,” Ricafort said.
The BSP raised the policy rate by a total of 225 basis points since the start of its hiking cycle in May.