PHILIPPINE PESO HITS RECORD LOW OF 59 TO US DOLLAR, WEAKEST IN OVER 2 YEARS

Philippine stocks snapped a four-day winning streak on profit-taking, after the peso tumbled to a record low of 59.0 against the US dollar Thursday (Photo courtesy of Philippine Daily Inquirer)

The Philippine peso depreciated against the US dollar for the third straight trading day to a record-low level of 59 to a dollar for the first time in more than two years, as investors sell off the currency amid growing expectations that the country’s central bank will cut interest rates.

Thursday’s depreciation comes as the US dollar strengthened against most global currencies to linger among one-year highs with Treasury yields hitting among 4.5-month highs, and the 10-year US government bond yields at 4.39%.

This is the same close recorded on Oct. 17, 2022, when the peso reached 59 against the dollar for the 12th time that year amid the aggressive rate hikes by the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

According to a senior adviser at professional services firm Reyes Tacandong & Co., Jonathan Ravelas, the peso’s weakness against the dollar reflects the rise in US 10-year Treasury yields, driven by “Trump 2.0” policies, including potential tax cuts and tariffs, which have boosted the dollar.

“This also reflects expectations of rate cuts by the BSP too. Noting that the trend could persist into 2025. The near-term risk is the peso breaching the 60 to $1 level,” he added.

The BSP earlier said that the peso's depreciation was not because of it weakness but because the US dollar was strong, noting that other currencies had also depreciated versus the dollar. Adrian Yu, Head of Institutional Sales at COL Financial also said the dollar's strength was making other currencies look weak.

"Well, the weakness of the peso wasn't just the weakness of the peso. I think we've seen it for all emerging market currencies. It was probably more the strength of the US dollar. After the election victory of Donald Trump, markets were trading into the US dollar quite heavily, thinking that rates would be more sustained, more elevated," Yu said.

According to BSP, it is monitoring the movement of peso against the dollar, but it does not worry much about the depreciation, as it lets the market dictate the movement. “We don’t worry so much about whether the peso depreciates. We worry about the pass-through effect and we do not intervene on the day to day movements.”

Source: ABS-CBN News

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