Philippine peso breaches P55 mark against US dollar

·Contributor
·2 min read
MANILA, PHILIPPINES: A money changer counts Philippine one thousand peso bills over a picture of US dollar in Manila 28 January 2005. (Photo: JOEL NITO/AFP via Getty Images)
MANILA, PHILIPPINES: A money changer counts Philippine one thousand peso bills over a picture of US dollar in Manila 28 January 2005. (Photo: JOEL NITO/AFP via Getty Images)

The Philippine peso has breached the P55-level against the US dollar, raising concerns that the local currency is depreciating too fast.

The local currency on Monday (June 27) however managed to temper losses, ending the day’s trading at P54.78 against the dollar – 20.5 centavos stronger than Friday’s P54.985.

“Since the start of 2022, the peso’s depreciation of 7.4 percent is now the worst in ASEAN (Southeast Asian markets),” Rizal Commercial Banking Corp. chief economist Michael Ricafort said.

According to the economist, the last time the peso traded at an intraday low that breached 55 against the dollar was more than 16 and a half years ago from October 25, 2005.

Ricafort said that the peso still closed stronger after eight straight days “as global oil prices recently lingered among one-month lows and the 10-year US Treasury yield lingered among two-week lows.”

Meanwhile, Bank of the Philippine Islands (BPI) lead economist Emilio Neri Jr. questioned government assertions that the peso was still relatively stable compared to other Asian currencies.

“On both a year-on-year (today compared to the same day last year) and a year-to-date (today compared to the start of this year) basis, the peso may soon overtake the South Korean won as the second weakest currency in Asia, with only the Japanese yen left depreciating more than the peso versus the US dollar,” Neri said.

“Now that we are trading near 55.10, the peso is down by more than 5 percent in about a month… not a very reassuring pace of decline,” he added.

Moreover, Nicholas Mapa, a senior Philippine economist at ING Bank, warned of faster inflation and a weaker peso ahead, citing the Bangko Sentral ng Pilipinas (BSP)’s lack of intention to increase interest rates.

In 2018, the BSP waited before increasing rates and eventually spent billions of dollars to stop the decline of the peso.

However, the central bank maintained that its rates does not need to rise along with US rates.

Incoming Governor Felipe Medalla told Bloomberg News on Friday (June 24) that “we don’t defend” the peso, adding that the central bank would allow market forces to determine the value of the local unit.

“We reduce volatility,” Medalla said, referring to the BSP’s option to draw dollars from the country’s reserves to soothe currency fluctuations.

According to BSP data, the country’s gross international reserves by end-May were at $103.53 billion. These are considered adequate if they can cover the foreign exchange needs for at least three months.

Pola Rubio is a news writer and photojournalist covering Philippine politics and events. She regularly follows worldwide and local happenings. She advocates for animal welfare and press freedom. Follow her twitter @polarubyo for regular news and cat postings.

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