The peso and the stock market sank Monday, with the local currency falling to a new 12-year low against the US dollar on the lingering possibility that the US Federal Reserve may increase interest rates two more times this year.
The stock market, meanwhile, plummeted to a 15-month low on fresh fears of a trade war between the world’s top two economies after the United States and China imposed tit-for-tat tariffs on billions of dollars of imports.
The peso lost P0.21 to close at 53.48 from 53.27 on Friday. It was its weakest level in almost 12 years since the 53.55 on June 29, 2006. Total volume traded stood at $568 million, lower than $796.45 million on Thursday.
The peso opened Monday’s trading P0.19 weaker at 53.46 and at one point touched 53.50 before settling at 53.48.
Philip Wee, foreign exchange strategist of DBS Group Research, said in a report that Asian currencies were facing depreciation pressures due to monetary policy divergences that have supported the US dollar globally.
“The Fed has affirmed that it will be moving to deliver a total of four, not three, rate hikes this year. The European Central Bank has confirmed that asset purchases will end in December which forced markets to reverse earlier bets for the central bank to bring forward its rate hike into 2019,” Wee said.
“… This should keep the Philippine peso, Indian rupee and Indonesian rupiah weak beyond the key levels of 53, 68, and 14,000 respectively,” Wee said.
Wee, however, said while not immune, these three Asian currencies had been notably more resilient than their emerging market peers.
Astro del Castillo, president and managing director of First Grade Finance Inc., said most investors were “flocking to the more attractive dollar assets” in the wake of the Fed’s move of raising interest rates last week.
He also said the brewing trade war between the world’s two economic powerhouses US and China contributed uncertainties to the financial markets.
“Traders are also weighing on the next move of the Monetary Board in its next meeting on Wednesday,” del Castillo said in a phone interview.