Peso weakest in over 11 years

MANILA, Philippines — The peso continued its downtrend yesterday, touching the 52 to $1 level during intraday trading amid the impending increase in US interet rates.

The local currency shed 21 centavos to plunge to its weakest level in more than 11 years as it closed at 51.98 to $1 from Monday’s 51.77 to $1. This was its lowest level since closing at 52.165 to $1 on July 21, 2006.

The peso opened weaker at 51.93 and even touched an intraday low of 52 before rallying to an intraday high of 51.84.

Traders said the Bangko Sentral ng Pilipinas (BSP) was active in the market to smoothen the volatility as the volume went up 9.9 percent to $1.02 billion yesterday from $930.6 million last Monday.

Metropolitan Bank & Trust Co. said in its daily view from the Metro the break of the 51.7 to $1 would open up the topside range targeting the 52 to $1 level.

Another trader said investors are awaiting the release of the January inflation in the US that would signal the tightening moves of the US central bank.

The US Fed has penned three rate increases this year, matching the number of rate hikes last year.

Analysts believe the US Fed would deliver its first rate hike for this year next month while the BSP’s Monetary Board would also be prompted to hike rates also in March.

The BSP kept interest rates untouched last week, but raised its inflation forecasts to 4.3 instead of 3.4 percent for this year and to 3.5 instead of 3.2 percent for next year.

The central bank has set an inflation target range of two to four percent between 2018 and 2020.

Inflation kicked up to its highest level in more than three years to four percent in January from 3.3 percent in December due to the initial impact of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law as well as rising oil prices.