The peso depreciated further against the US dollar on Friday in the wake of the US Federal Reserve’s rate increase on Wednesday, but the Bangko Sentral ng Pilipinas said it remains in the middle of the pack of the currencies in the region.
The peso lost P0.28 to close at 53.75 from 53.47 per dollar on Thursday. It was the local unit’s weakest level in almost 44 months since the 53.8 on Oct. 25, 2018. Total volume traded stood at $962.5 million, down from $1.141 billion previously.
BSP Department of Economic Research managing director Zeno Ronald Abenoja said during the balance of payments’ online briefing the peso’s movement reflected partly the shifts in sentiments following the recent policy pronouncement from advanced economies, particularly the US Federal Reserve.
Abenoja said financial markets were impacted as a result.
“We are looking at developments in the markets… [So far], the peso is comparable to other markets. We have one of the lower [and reasonable] movements to date,” Abenoja said.
Senior Assistant Governor Iluminada Sicat of the BSP Monetary Policy Sub-Sector said the peso depreciated against the US dollar by 4.23 percent as of June 14 compared to end-December 2021.
Comparatively, she said the Thai baht depreciated by 4.95 percent, Malaysian ringgit by 5.69 percent, Chinese yuan by 5.58 percent, and Korean won by 7.5 percent.
“We are in the middle of the pack and better than other currencies in the region,” Sicat said.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the peso’s weakness could also be attributed to the decline in Philippine Stock Exchange index Friday by -61.45 points or -1 percent to close at 6,331.56, a new 10-month low since Aug. 13, 2021.
He said this was partly “in line with the overnight declines in the US/global stock markets.”
On Wednesday, the Fed decided to hike interest rate by 0.75 percentage point, the biggest rate increase since 1994.
Ricafort said the Fed’s move would lead to a stronger US dollar against global currencies.
He said the appreciating US dollar has been observed “since the Fed started with its hawkish signals a year ago [June 2021], given widening interest rate differentials in favor of the US currency especially vs. developed countries with still near zero short-term interest rates such as Japan.”
Ricafort said the bigger 0.75 percent Fed rate hike was already priced in by the financial markets since last week and partly led to the stronger US dollar recently.
“My previous estimate for the US dollar/peso exchange rate for end-2022 was at 52.00-53.00; but recently adjusted higher to 52.50-53.50 and is still possible to adjust higher this estimate if there would be any further hawkish signals from the Fed/FOMC officials and would also be a function of the developments related to the Russia-Ukraine conflict,” he said.
The peso breached the 53-per-dollar level on June 10, 2022, as financial markets expected a more aggressive rate hike by the US Federal Reserve this week.
In its latest macroeconomic assumptions, the inter-agency Development Budget Coordination Committee projected the peso-dollar exchange rate to range from 51 to 53 this year. From 2023 to 2025, the peso-dollar rate assumption was pegged at 50-53.
The peso closed 2021 at 50.999 against the US dollar, significantly weaker than the 48.023 on the last trading day of 2020.