The peso closed at a new 13-year low against the US dollar Thursday after the Federal Reserve indicated more rate hikes are coming, a statement that bolstered the value of the greenback.
The peso lost P0.14 to close at 54.32 a dollar from 54.18 Wednesday. It was its weakest finish in almost 13 years, or since it settled at 54.425 on Nov. 22, 2005.
Federal Reserve Chairman Jerome Powell was quoted in a briefing that the US central bank has “ways to go yet before it gets interest rates to where they are neither restrictive nor accommodative.”
“Interest rates are still accommodative, but we’re gradually moving to a place where they will be neutral,” he said.
“We may go past neutral, but we’re a long way from neutral at this point, probably,” wire reports quoted him as saying.
Security Bank Corp. said in its daily report it was “expecting market to trade with a higher bias on broad US dollar strength…due to better than expected US data…and hawkish comments from Powell.”
The peso partially recovered versus the dollar after the Bangko Sentral raised interest rates by another 50 basis points to 4.5 percent on Sept. 27 to temper inflation and address excessive exchange rate volatility.
The peso has been posting multi-year lows against the US dollar the past few weeks because of the country’s widening trade deficit and the escalating trade war between the US and China.
Data showed that the local currency depreciated 8.8 percent against the US dollar since the start of the year.
The country’s balance of trade-in-goods’ deficit hit $22.49 billion in the first seven months, significantly higher than the $13.055-billion shortfall a year ago.
Prakash Sakpal, ING Bank Asia economist, said in an earlier report that remittances were insufficient to cover the trade deficit on a sustainable basis and the current account in deficit.
Money sent home by Filipinos working overseas rose 3 percent in the first seven months to $16.58 billion from $16.095 billion a year earlier.