Manila: The US dollar has plunged past 53 pesos Friday (June 10), as the exchange rate slid further down to Php53.07 against the greenback.
As the peso declines, overseas workers who remit earnings to loved back homes get a windfall.
An even higher “breakout” for the US currency is still entirely possible, says analysts, opening the door to the US dollar to resume its uptrend.
Moves by the Philippine central bank — which raised Philippine rates twice since March — did little to counter the Asian currency’s slide.
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The US dollar gained ground against the Philippine peso last week, breaking the Php52.50 support level, closing at its highest since March 2019, higher than the August 2019 peak.
The dollar has continued its upward spiral against the major currencies as higher US Treasury bond yields have diverted investment dollars away from emerging economies, including the Philippines.
The dollar has appreciated by more than 11% against the major currencies.
As the bedrock of the global economy, and a reserve currency for international trade and finance, the US dollar's relative value depends on the economic activity and outlook of the United States.
The peso hit 3.5-year lows in early May, plunging to 53.08 on May 9, its lowest level against the greenback since November 2, 2018.
A rate hike move on May 18 by the Bangko Sentral ng Pilipinas (BSP) helped sustain the peso’s value against the dollar — but only for a bit. It stood at 52.43 on May 19, 52.88 on June 4, and hit Php53.073 on Friday (at 9.17 am UTC), based on xe.com data.
Prior to BSP’s May 18 rate hit, the monetary authority had kept a dovish monetary policy — and a record low interest rate of 2%, in an attempt to safeguard Philippines’ post-COVID economic recovery.
On the other hand, US monetary authorities tightened its policies in 2022, primarily by raising Treasury bill rates to absorb more US dollars in the market and curb inflation.
On May 4, the US Federal Reserve raised interest rates by half a percentage point — a quick follow through from the first rate hike in more than three years on March 16 — during which the rate was raised by 0.25%.
Analysts say this divergence in monetary policies of the two countries contributed to the peso weakening against the dollar as the US currency traded higher.
The peso is hardly alone in weakening against the dollar: other emerging economies in the region are also exposed to the dollar’s growing strength.
In addition to fundamentals and technical factors, market psychology and geopolitical risk also influence