The peso depreciated to a fresh intraday low of 57.50 pesos against the US dollar on Tuesday, September 20, ahead of the central bank’s expected rate hike this week.
The local currency closed at a new low of 57.48P after opening at 57.40P, which was its closing rate on Monday. The previous high was on September 16 when the peso weakened to 57.43 pesos.
Since its end-2021 close of P50.99, the peso has depreciated by P6.49 or declined by 12.73%.
Based on data from the Philippine Bankers Association, the weighted average exchange rate was 57.42 pesos compared to 57.363 pesos previously. Spot market volume rose to $967 million from $508.4 million on Monday.
The peso first broke P57 on September 6th. The peso is expected to weaken further due to widening trade deficits, while rising interest rates in most major countries such as the United States are also adding pressure on exchange rates. Rising interest rates tend to make currencies volatile, especially in a risky external environment.
Meanwhile, US peso-dollar traders expect the Bangko Sentral ng Pilipinas (BSP) to raise the policy rate another 25 basis points (bps) to 50 bps on Thursday, September 22.
The BSP has raised its policy rate by 175 basis points since May 19. The current reference rate is 3.75%.
Exchange rate pressures stem from market expectations that the BSP will further tighten the benchmark rate at the last three monetary policy meetings of the Monetary Board this year. Depreciation pressures are also coming from the hawkish US Federal Reserve favoring a strong US dollar.
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