Peso weakens anew, hits new record low of P63.52 vs dollar

MANILA, October 23 ------ The peso slumped to a new record low of P63.52 against the dollar yesterday, October 22. The previous record was at P63.361 versus the greenback on Wednesday, October 21.

On Thursday's intraday trade, the peso hit a low of P63.545 to the dollar before clawing back to P63.52 at the close of trade. A weaker peso is expected to make oil purchases even more expensive as the commodity is purchased with dollars. It is also expected to stoke inflation. The depreciation is also expected to impact the country’s sovereign debt, of which a third is owed to foreign creditors.

A stronger dollar may initially benefit families of overseas Filipino workers, as they can get more pesos for every dollar sent. But inflation may also eat into their purchasing power. The Bangko Sentral ng Pilipinas (BSP) has raised interest rates to 5.5 percent amid heightened inflation risks. Central Bank Governor Eli Remolona, however, said the bank is niot hiking the policy rate to defend the peso. "We're not hiking the policy rate to defend the peso. We do intervene a little bit in the foreign exchange market, but that's mainly to avoid swings in the exchange rate that tend to be inflationary," Remolona said. "We have estimates of how much the peso has to move before it becomes inflationary, and that's when we tend to intervene."

Asked to describe BSP's posture in the foreign exchange market, Remolona said, "We don't defend the level..so we let the market determine that, and hopefully the market gets it right over the over the long term," he said. "We don't use up, we kind of come in without using up too much of our reserves, and and we we end up we end up just dampening the swing in the peso. We don't we don't end up preventing the peso from depreciating," he said.

Analysts say the peso and other currencies were affected by news of hotter-than-expected US inflation, which fueled expectations that the US Federal Reserve would hike rates again, which would make the dollar even stronger. A poll of analysts expects the Fed to keep rates steady in its meeting this month, but is expected to hike rates again in December.

Source: news.abs-cbn.com