Manila: The Philippine peso sank further on Tuesday to an all-time low after touching Php57 vs $1 for first time as investors continued to flock to the safe-haven currency.
A drop in the peso value provides a windfall for overseas Filipino workers who remit their earnings in dollars, or in currency pegged to the US greenback.
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The new record low, at Php57.12 was hit at about 4.45pm Tuesday (12.45 pm UAE time) after the Philippine currency finished on September 5 at Php56.999, and hitting an intra-day low breaching the Php57 mark from Php56.77 on Friday.
The peso’s previous weakest level was Php56.45 was recorded on Sept. 27, 2004.
Analysts explained the peso’s downward slide was in anticipation for additional hikes in the Fed’s key policy rates to address US red-hot inflation rate. The peso has weakened nearly 12% from its Php51-per-dollar close on Dec. 31, 2021.
Data from the US labour department showed the economy added 315,000 jobs in August, marking the 20th straight month of jobs growth.
However, the US unemployment rate also rose to a six-month high as nearly 800,000 people entered the labour market, driving the size of the labor force to also a record high. Recent jobs data could bolster the argument for a continued rate hike by the US Federal Reserve.
Due to the weaker peso and additional borrowings, the Philippine national government debt hit another record — up 0.8% or Php96.09 billion to an all-time Php12.89 trillion as of end-July, from Php12.79 trillion as of end-June.
Since January 2022, the country’s national debt had already jumped by 9.9%, after the government borrowed Php1.16 trillion more to bridge the budget gap, according to the Bureau of the Treasury (BTr).
Expectations of an elevated Philippine inflation could trigger the BSP Monetary Board to take an additional policy rate increases, thereby helping the peso recover, say traders.
Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla on Friday said they have done “enough” to stabilize the peso after a series of rate hikes.
The central monetary authority sees inflation averaging 5.4% this year, beyond its 2-4% target. Since May, the central bank had raised benchmark rates by 175 basis points in order to tame inflation.
Traders expect the Asian currency’s further weakening amid a number of factors: rising imports, US Federal Reserve interest rate hike, and high global oil prices.
Like many countries around the world, the Philippines faces skyrocketing inflation due to supply issues and high fuel cost.
The peso's weakening is seen triggering a higher-than-expected inflation in 2022. A weaker peso exchange rate also raises the peso value of the government's foreign debts and loans, potentially bloating the national debt in terms of the local currency.