Peso breaches 58:$1

Weakest level in nearly 19 months

MANILA, Philippines — The peso pierced the 58 to $1 level yesterday, weakening by 37 centavos to close at 58.27 from 57.90 last Monday, due to delayed rate cuts from the US Federal Reserve, the Bangko Sentral ng Pilipinas (BSP) said.

The peso depreciated for the second straight trading day to hit its lowest level since closing at 58.275 to $1 on Nov. 8, 2022.

In a statement, BSP Governor Eli Remolona Jr. said the peso weakened beyond the 58-level in line with other currencies in the region amid broad dollar strength.

“The dollar continued to strengthen as the Federal Reserve signaled delay in cutting interest rates,” he said. “The BSP continues to monitor the foreign exchange market, but allows the market to function without aiming to protect a certain exchange rate.”

“Nonetheless, the BSP will participate in the market when necessary to smoothen excessive volatility and restore order during periods of stress,” he added.

The local currency opened weaker at 55.97, which was its intraday high, before losing steam to hit an intraday low of 58.2 against the greenback.

Trading was heavy as volume surged by 33.8 percent to $1.62 billion from Monday’s $1.21 billion.

Security Bank chief economist Robert Dan Roces said the BSP would defend the local currency as necessary and when the foreign exchange market becomes very volatile.

“The peso’s weakness seems to be in line with movement of other regional currencies. Add to that statements by several Fed officials reiterating hawkishness and last week’s dovish BSP sentiment, which seem to have carried over in the sessions (for the past two days),” Roces said.

Officials from the US Fed said first-quarter inflation readings were “disappointing” and did not provide confidence to support policy easing in the near term.

Highly anticipated rate cuts are on hold until inflation returns firmly to the Fed’s two percent target, the officials said.

Last week, Remolona said the BSP could cut interest rates by the third or fourth quarter this year, possibly starting as early as August.

The BSP chief had also said it is possible for the Monetary Board to cut ahead of the Fed, which is expected to ease monetary policy in September.

According to Remolona, the BSP has been intervening less in the foreign exchange market and only does so to mitigate stress as well as to keep order.

To tame inflation and stabilize the peso, the BSP Monetary Board raised key policy rates by 450 basis points between May 2022 and October 2023, bringing the benchmark interest rate to a 17-year high of 6.50 percent.

The local currency has depreciated by P2.90 or 4.9 percent from its P55.37 to $1 close on Dec. 29, 2023.