The peso on Thursday depreciated further to its lowest level against the US dollar in more than 43 months, following the US Federal Reserve’s move to hike the interest rate by 0.75 percentage point on Wednesday, the biggest rate increase since 1994.
The peso closed at 53.47 per dollar, weaker than the 53.435 a day ago.
It was the local currency’s weakest level since the 53.535 on Oct. 31, 2018. Total volume traded reached $1.141 billion, down from $1.164 billion previously.
Michael Ricafort, the chief economist of Rizal Commercial Banking Corp., told Manila Standard the Fed’s move would lead to a stronger US dollar against global currencies.
Ricafort 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 against 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 ifthere 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,” Ricafort said.
The peso breached the 53-per-dollar level on June 10 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 in 2021 at 50.999 against the US dollar, significantly weaker than the 48.023 on the last trading day of 2020.