The peso depreciated to 49 per US dollar Monday, the lowest in almost eight years, amid global uncertainties following the result of the presidential election in the United States.
The peso lost P0.25 to close at 49.20 against the greenback Monday from 48.95 on Friday. It was the local currency’s weakest level since it settled at 49.37 against the dollar on Dec. 4, 2008 at the height of the global financial crisis. Total volume turnover reached $661.85 million Monday, lower than $707.50 million Friday.
“It’s the dollar’s strength. The other regional currencies also showed weakness today because the expectation of the market is the policies that are going to be adopted by the US government will likely lead to higher interest rates particularly Treasury rates, and as a result of that, capital flows are being moved towards the US. That is regional and emerging market-wide,” Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. told reporters.
‘[The peso’s decline] was still due to the result of the election in the US. But I believe this is temporary and the peso will recover,” Nicholas Antonio Mapa of the Bank of the Philippine Islands said in a statement.
“I don’t think the peso will go beyond 50 to a greenback, and we maintain our forecast of 49.02 versus the dollar by yearend,” Mapa said.
The peso opened the morning trade at 49.01, or six centavos weaker than 48.95 Friday.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo last week did not attribute the peso’s continuous decline against the dollar solely to the unexpected results of the US presidential election, where Donald Trump beat early frontrunner Hillary Clinton.
“It is difficult to make attribution to that alone. There are factors behind the exchange rates, such as fundamentals and sentiment,” Guinigundo said.
He said it was the market volatility that Bangko Sentral was continually monitoring because of its impact on investors’ sentiment.
After the result of the US election was announced, regional currencies, including the peso, fell on renewed risk aversion.
Fitch Ratings’ BMI Research said earlier the peso could possibly weaken beyond 50 against the greenback in the coming days if President Rodrigo Duterte’s intense war on drugs plus his continuous tough talking triggered prolonged political uncertainty.
BMI said the peso’s weakness in September was due to the “deteriorating investor sentiment” after Duterte hit back at the US after the latter lashed out at his war on drugs.
“In the event that these fears translate into something more tangible leading to prolonged political uncertainty, we believe that a further slide of the peso beyond 50 to US dollar could be likely,” BMI said.
It said a selloff in the Chinese yuan and an expected interest rates hike by the US Federal Reserve before the of the year could trigger “broad-based emerging currency weakness” that would impact the peso.
BMI expects the peso to average 47.95 per dollar this year, 48.50 next year and 48 in 2018.
ING Bank Manila senior economist Joey Cuyegkeng said the peso was not seen to depreciate too much this year as the country’s solid macroeconomic fundamentals continued to shield it from volatilities.