Philippines: Peso further sinks, closes at new low of 56.999:$1

MANILA, Philippines — The peso’s weakness persisted yesterday, momentarily touching the 57 to $1 barrier before closing at an all-time low of 56.999, 22.9 centavos lower than the previous record low of 56.77 on Friday.

The local currency opened weaker at 56.85 and hit an intraday high of 56.80 before losing steam to touch an intraday low of 57 to a dollar.

Volume inched up slightly by 4.2 percent to $976.45 million from Friday’s $936.95 million.

Kausani Basak, foreign exchange analyst at ANZ Research, said the depreciation of the peso continued as strong domestic demand is challenging external trade dynamics.

“This and the unabated US dollar strength drove down the peso,” Basak said.

The peso is one of the weakest performing currencies in the region, shedding P6 or 11.7 percent from the end-2021 level of 50.999 to $1.

Basak said the series of rate hikes by the Bangko Sentral ng Pilipinas (BSP) to control inflation has not been enough to address the steady depreciation of the peso against the dollar.

The BSP has so far raised interest rates by 175 basis points, bringing the benchmark rate to 3.75 percent from an all-time low of two percent, to check inflationary pressures.

After delivering a huge 75-basis-point hike during a surprise off-cycle rate setting meeting last July 14, the BSP raised key policy rates by another 50 basis points on Aug. 18 to anchor inflationary expectations.

“BSP delivered another 50-basis-point rate hike over the month to rein in inflation, but that has not been sufficient to prevent the peso from weakening. BSP has also intervened in the forex market to prevent excess volatility over the past few months, leading to a reduction in gross international reserves,” Basak said.

ANZ said the country’s foreign exchange buffer or gross international reserves fell below $100 billion for the first time in almost two years to hit a 23-month low of $98.83 billion in July from $100.85 billion in June.