Peso sinks to 10-year low of 50.50 per dollar

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The peso sank to its weakest level in more than 10 years, on lingering anticipation of the next move of the US Federal Reserve and the gloomy outlook of the International Monetary Fund on the world’s largest economy.

The peso lost P0.21 Wednesday to close at 50.50 a dollar, down from 50.29 Tuesday. It was the local currency’s weakest level in more than 10 years, or since it settled at 50.524 against the greenback on Sept. 13, 2006. 

Total volume turnover reached $1.279 billion Wednesday, higher than $452.65 million Tuesday.

Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said the local currency’s slump was mostly externally driven, especially as the US Congress was not expected to expedite President Donald Trump’s tax measures and fiscal spending.

BSP Deputy Governor Diwa Guinigundo

He also said the “IMF was reported to have a more pessimistic view of the US economy which could affect the outlook for emerging markets including the Philippines. Hence, regional currencies depreciated across the board.” Related story on B4.

“Finally, it’s quarter and semester end and banks are servicing FX requirements of their corporate clients… heavier than usual,” Guinigundo said.

First Grade Finance managing director Astro del Castillo said the peso’s decline remained “Fed related” as investors anticipated the US central bank to increase interest rates in the coming months.

New York Fed president William Dudley, a close ally of Fed chair Janet Yellen, said last week that US inflation was a bit low but should rise alongside wages as the labor market continued to improve, allowing the Federal Reserve to continue gradually tightening US monetary policy. 

That statement drove peso to continuously fall against the US dollar.

The peso closed at 49.72 to a dollar on the last trading day of 2016. It dropped to 50.40 against the greenback on March 3, 2017, before rebounding in the succeeding days.

The Cabinet-level Development Budget Coordination Committee kept the peso-dollar exchange rate target this year at P48 to P50, while admitting that global economic and political developments could affect the trend in emerging market currencies, including the peso.

DBCC’s forex forecast for the years 2018 to 2022 was adjusted to P48 to P51 per dollar, following the resumption by the US Fed of its monetary policy tightening that could put more pressure on emerging market currencies.

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