The peso weakened to a new seven-year low against the US dollar Monday as uncertainty gripped financial markets ahead of the US presidential elections on Nov. 8.
The peso lost P0.10 to close at 48.585 against the greenback Monday from 48.48 Friday. It was the local currently’s weakest level since settling at 48.62 on Sept. 4, 2009 at the height of the global financial crisis.
Total volume turnover reached $228.15 million, lower than $398 million previously.
“This is [US] election-related, and everybody is unsure on who will win the US presidential election,” Bank of the Philippine Islands research officer Nicholas Antonio Mapa said in a statement.
“It looks like emerging markets are favoring [Hillary] Clinton but anything can happen,” Mapa said.
The peso opened the morning trading two centavos stronger at 48.50 and touched 48.59 at one point, before closing at 48.585.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. earlier said the peso’s weakness in the past few days was driven mainly by external factors, particularly the expected rate hike by the US Federal Reserve before the end of the year.
Tetangco said there were some domestic factors that impacted the peso such as the increase in corporate demand for dollars for both fixing and import requirements.
He said the volatility would continue until there was a clearer action or decision on the part of the Fed.
Fitch Ratings’ BMI Research said in a recent report the peso could possibly weaken beyond 50 a 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 end of the year could trigger “broad-based emerging currency weakness” that would impact the peso.
BMI said it expected the peso to average 47.95 a dollar this year, 48.50 next year and 48 in 2018.
ING Bank Manila senior economist Joey Cuyegkeng, however, said the peso was not expected to depreciate too much this year as the country’s solid macroeconomic fundamentals continued to shield it from volatilities.
Cuyegkeng revised his previous peso exchange rate forecast by yearend to 47.50 from 46.60, taking into consideration the volatility in the financial markets.
Economists from the First Metro Investment Corp. and University of Asia and the Pacific earlier projected that the peso might trade between 48 and 49 versus the greenback this year.
The inter-agency Development Budget Coordination Committee maintained a foreign exchange target of 45 to 48 pesos per dollar from 2016 to 2018.