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Thursday, November 30, 2023

Peso sinks to new all-time low of 58 against US dollar

The peso settled at a new all-time low of 58 against the US dollar Wednesday as investors closely watch the expected new interest rate hikes by the US Federal Reserve.

The peso shed P0.52 to close at 58 against the greenback Wednesday, down from 57.48 Tuesday. Total trade volume reached $1.051 billion, up from $967 million a day earlier.

Reports overseas said the Federal Open Market Committee headed by Jerome Powell might announce a 75-basis-point interest rate hike, with many economists not ruling out a 100-bps increase.

The Fed earlier increased interest rates by 75 bps, saying it was committed to rein in inflation at 2 percent.

Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the 58 intraday level of the peso was also the new intraday record low.

“This could lead to higher import prices and overall inflation, as well as could lead to more aggressive local policy rate hike especially on Sept. 22, 2022 to help stabilize the peso, inflation and inflation expectations,” Ricafort said.

“This is the 8th record-high closing rate for the US dollar/peso exchange rate since the start of 2022,” he said.

Ricafort said the peso also weakened after global crude oil prices corrected slightly higher, but still near eight-month lows.

He said the peso already depreciated by a total of P7.001 or 13.7 percent from 50.999 in end-2021.

“For tomorrow, the peso exchange rate could range [at] 57.85 to 58.05 levels,” Ricafort said.

Robert Dan Roces, chief economist of Security Bank, said the continued peso weakness was due to “US dollar strength and positioning still ahead of the Fed and BSP meetings.” The Bangko Sentral ng Pilipinas would hold its policy meeting Thursday.

Roces said the BSP “should opt for a stronger message by way of clearer forward guidance beyond the actions tomorrow. Inflation is an upside risk with weaker peso.”

Moody’s Investor Service, a unit of debt watcher Moody’s Corp., said the Bangko Sentral ng Pilipinas might announce a 50-bps rate hike Thursday that would bring the overnight borrowing rate to 4.25 percent.

Ricafort earlier said the peso also weakened after the World Bank warned that the global economy might face a recession in 2022 on aggressive monetary policy tightening or interest rate hikes that could still be not enough to bring down elevated inflation.

He said the World Bank noted the “most synchronized rolling back of monetary and fiscal stimulus measures by central banks around the world in about 50 years.”

“The peso also weakened amid some POGO [Philippine offshore gaming operations]-related policy uncertainties, especially those allegedly involved in illegal activities may have also added to some market concerns as this could reduce POGO revenues and also reduce other business activities in the country,” Ricafort said.

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