Peso breaches all-time low amid resurgent dollar trend

MANILA, Philippines — The peso trembled under the weight of the all-mighty dollar, breaching its all-time low on Friday sustaining a weakness driven by surging imports and a strong dollar trend.

The local unit closed at P56.77 against the greenback, weaker than its previous close of P56.345. Data showed this was the peso's worst performance since Oct. 13, 2004, when it hit an all-time low of P56.45.

The Philippines was in the throes of a fiscal crisis under the Arroyo administration.

As it is, the peso's continued decline is foreboding for a Philippine economy reeling from imported inflation driven partly by expensive oil. The Philippine economy is also looking to regain economic momentum as it recovers from pandemic fallout in the past two years.

This strong dollar trend is taking notes from the US Federal Reserve's slate of aggressive rate hikes to cool down consumer demand stateside. Despite this, the peso joins other regional currencies, including the euro, bucking under a resurgent greenback.

Sought for comment, Domini Velasquez, chief economist at China Banking Corp., explained that the local unit performed poorly compared to currencies of other developing economies. Investors turn to safe-haven currencies, such as the dollar, when economic conditions turn a tight corner in certain regions.

"This sentiment led to another round of highs for the US dollar against a basket of currencies. Although the strength of USD affected most emerging market currencies, in recent months the Philippine peso has been more susceptible such that it has fallen to a larger degree than emerging market peers," she said in a Viber message.

For Nicholas Antonio Mapa, senior economist at ING Bank in Manila, a trade deficit pushed the peso beyond the historical low.

"Ballooning trade deficit on account of surging imports coupled with financial outflows dragging on currency. @BangkoSentral to likely retain hawkish tilt and bring RRP to 4.5% by yr end. All eyes on NFP tonight," he tweeted.

Velasquez explained the peso's weakness was despite the rate hikes unleashed by the Bangko Sentral ng Pilipinas to tame red-hot inflation in the country.

"Further depreciation of the PHP might prompt the BSP to hike interest rates in all of its remaining 3 meetings," she added.