Peso falls further as euro zone concerns and inflation fears weigh
The Philippine peso weakened further against the US dollar on Tuesday as investors sought safer assets due to concerns over France’s fiscal troubles and rising inflation in the Philippines.
The peso dropped by 15 centavos to close at P62.771 per dollar, down from P62.621 on Monday, according to data from the Bankers Association of the Philippines. The local currency opened the day stronger at P62.55 per dollar but later fell to a low of P62.84, nearing its record low of P62.86 set on September 14. Trading volumes also decreased to $1.496 billion from $1.689 billion the previous day.
A trader attributed the peso’s decline to safe-haven demand driven by Europe’s fiscal and political uncertainties. Meanwhile, Michael L. Ricafort, Chief Economist at Rizal Commercial Banking Corp., noted that elevated US Treasury yields made the dollar more attractive. The euro also faced pressure, stabilizing just above a 17-month low after dropping sharply due to concerns about high debt levels and political gridlock in France.
The peso’s decline was further fueled by higher-than-expected Philippine inflation in September, which hit 7.2%, up from 6.1% in August and 1.7% a year earlier. This marked the fastest inflation rate in three-and-a-half years. Analysts now expect the Bangkok Sentral ng Pilipinas (BSP) to raise interest rates for the fourth consecutive time this month, with policy reviews scheduled for October 22 and December 17. The BSP has already increased rates by 75 basis points since April, bringing the policy rate to 5%.
Looking ahead, the trader predicts the peso will trade between P62.50 and P62.85 on Wednesday, while Ricafort expects a range of P62.65 to P62.85.