Foreign currencies are losing their value against the US dollar at every turn.
The euro, the Japanese yen, and the pound sterling are tumbling to multi-year lows against the mighty US currency, with no end in sight to the free fall.
The peso, too, sank to a new low of 58.49 against the US dollar yesterday from 58.00 the other day.
The major currencies are not also faring well. The euro is at a 20-year low of $0.9847 against the greenback yesterday, while the yen dropped to a low of 145.90. The sterling touched a fresh 37-year low of $1.1221.
A big number of money and stock market traders are dumping their investments and switching to dollar-based securities such as US Treasury Bills, which are now offering better returns. World stock markets are crashing as fund managers gravitate towards high-yielding US T-bills and other financial instruments denominated in the American currency.
The US Federal Reserve Board, or central bank, has been boosting the value of the US currency through a series of aggressive interest rate hikes in its effort to tame spending and rising inflation.
The US Fed is not pausing in the fight against surging inflation—it will continue to raise the cost of borrowing money even if the rate hikes lead to a contraction of the American economy.
For developing nations like the Philippines, a weaker peso makes imports, including crude oil, costlier. It has the immediate effect of raising the pump prices of gasoline and diesel. Oil companies like Petron Corp. will have to shelve more pesos for the same single dollar to purchase crude in the world market.
The same is true with other imported commodities, like wheat and sugar, and gadgets like cell phones.
The Bangko Sentral ng Pilipinas, meanwhile, is resorting to interest rate hikes in its own battle against rising inflation, which is precipitated by the Russian invasion of Ukraine, high crude prices, and increased demand from a recovering global economy.
The Bangko Sentral will have to do a lot of monetary actions to neutralize the US Fed’s moves, meaning our own central bank must craft something to make the peso competitive with the US dollar and attractive again to money and stock market traders. Until then, the peso will remain wallowing in the depths.