Peso Hits Record Low of P62.40 Amid Fed Hawks and Middle East Tensions
The Philippine peso hit a new record low of P62.40 against the US dollar on Tuesday, according to Bankers Association of the Philippines data. The local currency weakened by 13.5 centavos from its previous record of PHP 62.265 on Friday.
Banking experts attribute the peso's decline to hawkish signals from the US Federal Reserve and intensifying Middle East tensions, which lifted the greenback. Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said that rising US Treasury yields, growing expectations of a rate hike by the Fed, and higher oil prices are driving investors towards dollar assets.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that the peso's decline was tempered by signs that the Bangko Sentral ng Pilipinas (BSP) may have intervened to smooth excessive volatility. Meanwhile, BSP Governor Eli M. Remolona, Jr. said that the central bank can only slow the peso's depreciation and manage sharp movements rather than defend a specific level as they will run out of reserves.
Experts predict that the peso will remain under pressure in the near term, with MUFG Global Markets Research Senior Currency Analyst Michael Wan forecasting USD/PHP trading around PHP 62 levels for the remainder of the year. However, he expects the peso to gradually strengthen against the dollar driven by factors such as a potential narrowing of the country's trade deficit and a growth recovery.