The peso sank to a new 11-year low of 51.53 against the US dollar Thursday, as investors’ demand for the greenback picked up in the fourth quarter.
The local currency lost P0.13 Thursday from 51.405 a dollar Wednesday. It was the peso’s weakest closing in more than 11 years, or since it settled at 51.60 against the green back on Aug. 24, 2006. Total volume turnover reached $565.70 million Thursday, up from $497.6 million Wednesday.
“We continue to see the effects of higher corporate demand for imports and trade financing. Rumors about a possible hawkish Fed chairman in John Taylor appeared to have spooked the market. There seems to be some nervousness in the market,” Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said in a statement.
Guinigundo, however, said the peso movement continued to be consistent with the trend. He said the foreign exchange rate was manageable and its impact on inflation had gone down.
“In short, our latitude in allowing greater flexibility in the exchange rate has widened. When the cycle reverses, we should see some upward shift,” he said.
“The peso touched P51.61 last Friday but supply of US dollar came out to close the week at P51.39. We still expect the peso to trade within this range in the near term with the view that Bangko Sentral ng Pilipinas turns hawkish and eventually does a pre-emptive move to stabilize inflation expectations,” ING Bank Manila senior economist Joey Cuyegkeng said in a report.
“The peso touched P51.61 last Friday but supply of US dollar came out to close the week at P51.39. We still expect the peso to trade within this range in the near term with the view that Bangko Sentral ng Pilipinas turns hawkish and eventually does a pre-emptive move to stabilize inflation expectations,” ING Bank Manila senior economist Joey Cuyegkeng said in a report.
Inflation rate in September accelerated to 3.4 percent from 3.1 percent in August, driven by higher increases in the prices of food items.
Cuyegkeng earlier said one factor that contributed to the peso weakness was higher importations, which required more dollars.
Finance Secretary Carlos Dominguez III earlier said the weakening of the peso versus the greenback was expected on rising importation of capital goods amid the growth of the manufacturing sector.
Latest data from the National Economic and Development Authority showed that the trade-in-goods deficit in August widened to $2.41 billion from $2.13 billion in the same period last year, as imports continued to outpace exports.
Total exports increased 9.3 percent to $5.51 billion in August from $5.04 billion a year ago, while imports jumped 10.5 percent to $7.92 billion from $7.17 billion.
The Cabinet-level Development Budget Coordination Committee recently kept the peso-dollar exchange rate target this year at P48 to P50 a dollar.
DBCC’s forecast for the years 2018 to 2022 was adjusted to P48 to P51 per dollar, with to the resumption of the US Federal Reserve’s monetary policy tightening that could put more pressure on the peso.
The peso hit an all-time low of 56.45 a dollar in August 2004.