The Philippine peso sank to yet another all-time low against the US dollar, closing at P57.48 versus the greenback on Tuesday, data from the Bankers Association of the Philippines showed.
The peso weakened to a low of P57.50 in intraday trading, BAP data showed. The peso closed at P57.43 to a dollar last Friday.
Markets and central banks globally are anticipating another interest rate hike by the US Federal Reserve to tame inflation. The Fed is set to start its two-day meeting on Tuesday (Wednesday in Manila), with several analysts expecting another aggressive rate hike.
Meanwhile, the Bangko Sentral ng Pilipinas will hold a policy-setting meeting on Thursday.
Interest rate hikes by the US Fed cause the dollar to rally, which in turn leads to the depreciation of other currencies, including the peso.
“[US] Inflation is still heading upwards. It’s very clear that the Fed will raise rates by at least 75 basis points and our expectation is that it will continue to raise rates by November, December and into next year,” Moody’s Analytics Chief APAC Economist Steven Cochrane told ANC.
“The central bank [BSP] has two things to watch for. One is controlling inflation, but then also the currency — this is where the conundrum that many central banks in the region are at — they need to manage the spread between interest rates with the US rates to try to avoid any significant capital outflows from Asia to the US,” he added.
The BSP is widely expected to raise the country’s benchmark interest rate on Sept. 22. The policy rate is primarily adjusted to address surging inflation, but it could also stabilize the currency, BSP Governor Felipe Medalla said earlier.