The peso hit a new eight-year low against the US dollar Monday as the looming interest rates hike by US Federal Reserve next month and uncertainties on the policies of newly-elected President Donald Trump continue to impact global financial markets.
The peso lost 5 centavos to close at 49.83 per dollar Monday, from 49.78 a greenback Friday, matching the 49.83 a dollar at the close of trading day on Nov. 24, 2008 during the global financial crisis. Total volume turnover reached $391.6 million, lower than $812.9 million Friday.
The peso opened the day’s trading four centavos weaker at 49.82 and touched 49.93 at one point before settling at 49.83.
“The peso depreciated slightly today still because of risk aversion amid US political uncertainties and concerns over the possibility of a US interest rate hike next month,” Land Bank of the Philippines said in a comment.
“For tomorrow, the exchange rate may move within the 48.70 to 50 range. Trading might still be influenced by worries about December’s likely increase in the federal funds rate. Profit taking, however, might cap the dollar’s appreciation,” it said.
Security Bank said in a report that “bias is still for a stronger US dollar as both fundamentals and technicals are supportive of this view.”
Bank of the Philippine Islands’ Asset Management said with foreign selling expected to continue this week, “we expect the peso to continue falling, potentially testing the 50-level.”
Bangko Sentral Deputy Governor Diwa Guinigundo said over the weekend the country’s sound macroeconomic fundamentals continued to shield the peso from further volatility.
“The exchange rate is normally our first line of defense in adjusting to new shocks to the peso and the rest of the economy. Given the uncertainties surrounding the new leadership in the US, Brexit, US Fed interest rate hike and China slowdown, the peso is now our adjustment tool,” Guinigundo said in a text message.
“As long as the volatility remains manageable and speculative plays are held at bay, we should allow the adjustment to continue. After all, we should remember that our fundamentals remain sound with third-quarter real GDP at 7.1 percent–which would anchor all of these adjustments and rebalancing to manageable proportions,” he said.
He said monetary authorities would remain attentive and closely monitor the situation.
Economists from First Metro Investment Corp. and University of Asia & the Pacific said earlier the “US/PHP rate will remain under pressure as the Fed raises its policy rate in December, and as the local stock market may go sideways until the end of the year.”
Fitch Ratings’ BMI Research said in October the peso could possibly weaken beyond 50 to 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.
