Connect with us

Hi, what are you looking for?

News

Peso slumps to lowest since 2005

REUTERS

THE PHILIPPINE PESO on Wednesday slumped against the US dollar, closing at its lowest value since November 2005, amid the Bangko Sentral ng Pilipinas’ (BSP) signals of gradual policy tightening.

The BSP is widely expected to fire off a 25-basis-point (bp) hike at its policy meeting today (June 23) to curb inflation.

The local unit closed at P54.47 versus the dollar on Wednesday, shedding 20.5 centavos from its P54.265 finish on Tuesday, data from the Bankers Association of the Philippines showed.

This was the peso’s worst close in 16-1/2 years or since it ended P54.74 against the greenback on Nov. 21, 2005.

The local unit’s weakest showing was at P54.635 on Wednesday, the lowest since March 2003. Its intraday best was P54.30 against the greenback.

Dollars exchanged inched down to $1.34 billion on Wednesday from $1.38 billion on Tuesday.

“The peso’s performance continues to be driven by fundamental factors such as a strong dollar and the country’s increasing import demand,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.

The BSP’s signals of gradual monetary tightening was also a factor in the peso’s weakening against the US dollar, she added.

“The BSP’s dovish stance on monetary policy normalization against aggressive rate hikes of the Fed contributed to the recent weakening of the Philippine peso. Even if BSP hikes its policy rate by 25 bps in every meeting this year, we expect domestic policy rates to continue to lag behind,” Ms. Velasquez said.

“This gradual pace of BSP’s monetary tightening will contribute to the general weakness of the peso as investors will opt to move to higher yielding assets.”

A BusinessWorld poll last week showed 15 out of 16 analysts anticipate a rate hike at the June 23 meeting. Nine analysts expect the Monetary Board to raise rates by 25 bps. Six analysts see an increase of 50 bps, after the US Federal Reserve hiked rates by 75 bps last week.

BSP Governor Benjamin E. Diokno and current Monetary Board member Felipe M. Medalla have said it is unlikely that they will raise key rates by more than 25 bps in today’s meeting.

“Personally, I do not like 50 basis points. It signifies that we know something bad that you don’t know. It could be misread, as ‘wow, what does the central bank know that we don’t know,’” Mr. Medalla said during a roundtable with BusinessWorld editors on June 14.

The BSP still has the “luxury of time and large reserves,” Mr. Medalla said at that time. “If the markets think we’re behind the curve, they will attack the peso,” he added.

The peso continued to weaken against the US dollar despite the latest declines in global crude oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort pointed out.

A trader also attributed the peso’s performance to hawkish expectations ahead of US Fed Chair Jerome H. Powell’s two-day testimony to Congress.

“For (June 23), the peso exchange rate could range at P54.40-P54.60 levels,” Mr. Ricafort said.

The Monetary Board kicked off its tightening cycle on May 19 by raising the yield on the BSP’s overnight reverse repurchase facility by 25 bps to 2.25%. Interest rates on the overnight deposit and lending facilities were also increased to 1.75% and 2.75%, respectively.

This was the first increase in borrowing costs since 2018 and followed cuts worth 200 bps in 2020 as the BSP moved to support the economy amid the coronavirus pandemic. — Keisha B. Ta-asan

Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

News

PHILIPPINE STAR/ MICHAEL VARCAS WASHINGTON D.C. — The United States is seeking to form a coalition of countries to drive negotiations on a global...

News

Buildings are seen along EDSA in Quezon City. — PHILIPPINE STAR/ MIGUEL DE GUZMAN By Diego Gabriel C. Robles  THE WORLD BANK (WB) upgraded...

News

Heavy traffic is seen on the southbound lane of EDSA in Cubao, Quezon City. — PHILIPPINE STAR/ MIGUEL DE GUZMAN THE PHILIPPINE auto industry’s...

News

REUTERS THE BANGKO SENTRAL ng Pilipinas (BSP) may deliver a second off-cycle rate hike in early November when the US Federal Reserve is expected...

News

Vendors arrange their goods at a public market in Manila. — PHILIPPINE STAR/ RUSSEL A. PALMA THE ASIAN Development Bank (ADB) is planning to...

Editor’s Pick

With the reversal of the 1.25% rise in National Insurance Contributions happening on the 6th of November, employers across the nation have an opportunity...

You May Also Like

News

BW FILE PHOTO GROSS BORROWINGS by the National Government reached P2.6 trillion as of end-September as it continued to raise funds to respond to...

News

KARASOLAR.COM TENA, Ecuador — Ecuador’s rainforest Achuar people say their ancestors long dreamed of a “fire canoe” or “electric fish” that would let them...

News

REUTERS By Luz Wendy T. Noble, Reporter The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s...

News

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing...

Disclaimer: Respect Investment.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2022 Respect Investment. All Rights Reserved.