THE PESO weakened to a new record low versus the dollar for the fifth straight day following hawkish signals from the US Federaal Reserve.
The local unit closed at P57.18 a dollar on Thursday, inching down by 4.5 centavos from its P57.135 finish on Wednesday, according to Bankers Association of the Philippines data.
Year to date, the peso has weakened by 12.11% or P6.18 from its P51-per-dollar close on Dec. 31, 2021.
The local unit opened Thursday’s session at P57.07 against the dollar. The peso’s weakest showing was at P57.22, while the intraday best was at P57.06 against the greenback.
Dollars exchanged inched down to $1.15 billion on Thursday from $1.23 billion on Monday.
The peso declined following hawkish signals from officials of the US Federal Reserve, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Cleveland Fed President Loretta J. Mester on Wednesday said she isn’t convinced that US inflation has peaked.
“(Services inflation) tends to be much more persistent and rents are still very elevated…It takes a while for rents to show up in underlying inflation. There’s still more that’s going to show up,” Ms. Mester said in a webcast.
Federal Reserve Bank of Boston Susan M. Collins said “we’ve not yet seen significant declines in prices, and that’s what we’re going to be looking for.”
“We need to do more,” Ms. Collins said in a podcast interview of the regional bank.
“We are in this for as long as it takes to get inflation down,” Fed Vice Chair Lael Brainard said in an annual conference of The Clearing House and Bank Policy Institute. “It will be necessary to see several months of low monthly inflation readings to be confident that inflation is moving back down.”
The Fed has raised benchmark rates by 225 basis points (bps) since March, including back-to-back 75-bp hikes in June and July.
It is expected to fire off another aggressive increase at its Sept. 20-21 meeting as Fed Chair Jerome Powell last month said they need to keep rates higher for longer to bring prices back to their target level.
Mr. Ricafort also attributed the peso’s decline to the continued drop in the country’s gross international reserves to their lowest since August 2020.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the country’s dollar reserves stood at $98.98 billion as of August, 0.85% lower from $99.83 billion as of July and down 8.3% from the $107.96 billion level seen a year prior.
The BSP said the decline was due to the lower valuation of its gold reserves and higher government withdrawals to repay debt.
For Friday, Mr. Ricafort expects the peso to move from P57.05 to P57.25 per dollar. — K.B. Ta-asan