Philippine PesoPeso weakens to ₱51 vs. dollar after over a year

adminSeptember 27, 2021

Metro Manila (CNN Philippines, September 27) — The Philippine peso slid back to ₱51 against the dollar on Monday after a year and a half, data from the Bankers Association of the Philippines revealed.

After appreciating for four straight trading days, the local currency finished ₱51 flat versus the greenback from ₱50.65 on Friday. This is its worst performance since March 26 last year, where the peso closed at ₱51.07 against the dollar.

Economists attribute this to officials of the US Federal Reserve adopting a more hawkish tone regarding the American central banking system’s monetary policy in the months ahead.

RCBC chief economist Michael Ricafort cited in particular recent signals from the Federal Open Market Committee members on the tapering of bond purchases and possible interest rate hikes come 2022.

These had sent “the US dollar to 1-month highs and also among 6-month highs vs. major global/Asian currencies,” he said, also noting the recent jump in bond yields given the American officials’ cue on tapering.

With the benchmark 10-year US government bond yield at 2.5-month highs, Ricafort said this made the dollar more attractive with higher interest rate returns.

Increasing expectations on tapering from the Fed mixed with the Bangko Sentral ng Pilipinas’ dovish policy stance could have also contributed to the weaker peso, said BPI lead economist Jun Neri, noting it might also be a “one-off uptick.” 

“Maybe import prospects are also improving as the local economy attempts to reopen again,” he explained.

Fitch Solutions earlier forecasted the peso to weaken “within a wide range over the near term,” noting uncertainty amid the COVID-19 health crisis and policy response is weighing on investors’ confidence.

It expects the currency to trade between ₱49 to ₱52 against the dollar in the next three to six months.