On September 2, the Philippine peso fell to a record low, increasing pressure on the Philippine central bank to raise interest rates more aggressively to curb the decline in the exchange rate.
On Friday, the Philippine peso briefly fell 0.9 percent to an all-time low of 56.90 pesos per dollar, extending its decline to 10 percent this year. So far in 2022, the Philippine peso is the third-worst-performing currency in Asia, behind the Yen and the South Korean Won.
As of press time, USD/PESO is 56.835.
Trinh Nguyen, a senior economist at The French Foreign Trade Bank in Hong Kong, said the Philippine peso could fall to 57 pesos per dollar by the end of the year.
In addition, emerging-market currencies have weakened across the board as fed rate hikes have boosted the dollar, prompting central banks to dump hundreds of billions of dollars from foreign exchange reserves to slow the decline in their currencies. The outflow of Philippine equities has also increased pressure on the peso, with overseas investors selling $1 billion in local stocks this year.
Trinh Nguyen说:
"We believe the peso will face further weakness as imports increase and break below the all-time low set in 2004. At the same time, the trade deficit widened as exports were dragged down by weaker foreign demand.
The growing policy divide between the hard-line Fed and the Philippine central bank has also put pressure on Peso, meaning the central bank must respond with sharp interest rate hikes to contain the decline. ”
However, Philippine Central Bank Governor Felipe Medalla said in August that the central bank could slow down the pace of tightening policy after a series of interest rate hikes may have dampened inflation. He told the media that central bankers are more likely to raise rates once or twice at 25 basis points for the rest of the year.
Previously, the Central Bank of the Philippines raised the benchmark interest rate by 50 basis points on August 18 and 75 basis points on July 14.
As the Fed raises interest rates to boost the dollar, Asian currencies weaken across the board, and the South Korean won and yen bleed profusely.
On Thursday, the dollar continued to strengthen after the U.S. released a better-than-expected manufacturing index, and the yen fell again. The dollar fell below 140 against the yen, the lowest since September 1998, and the yen has fallen by 25% since the beginning of the year.
USD/KRW continued to refresh its 13-year low at 1359.20. Morgan Stanley analysts said a break above the 1350 key could pave the way to 1370.
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