Manila: The Philippine peso hit the Php55 vs $1 level on Tuesday, (June 28) breaching Php55.15 at its intra-day weakest against the US dollar on Monday, despite two policy rate hikes by the central bank to sweep extra cash and curb inflation.
The peso’s daily slide raised concerns the local currency is dropping too fast amid declarations by the country’s monetary authorities that it remains “stable”.
Today’s slide is close to the level set on October 25, 2005 — nearly 17 years ago — when the peso traded at Php55.26 v. $1.
The peso has averaged 53.437 this month so far, from 48.125 average recorded in the same month last year. Since January 2022, the local currency has dropped 7.4 per cent, making it now Asean's worst performer.
The Bangko Sentral ng Pilipinas (BSP)’s reference exchange rate bulletin shows the dollar closing at Php54.9820 on Tuesday, though the bank was selling the greenback at Php55.050.
Over the last 12 months, the Philippine peso has hit new multi-year lows, and off more than 13% from year-ago close of Php48.57 (on June 28, 2021).
BSP's Monetary Board, the country’s central monetary authority, has announced a 50 basis points rate hike earlier this month (June 2022) to curb higher inflation, following a recent US Federal Reserve decision that has led to a chorus of rate-raising decisions from most central banks.
To arrest local inflation amid a spike in global oil price, additional policy rate increases on the back higher-than-expected balance of payments (BOP) deficit are expected in the Monetary Board’s subsequent meetings.
Higher interest rates means higher borrowing charges for businesses as well as auto and housing loans. Mortgages based on “floating” rates may also rise.
The country's current account balance is expected to see wider deficits in 2022 and 2023 than the original forecast on account of higher fossil fuel import bills.