By Katherine K. Chan, Reporter
THE PESO may test new lows this week as inflation concerns and the greenback’s continued strength following US Federal Reserve officials’ hawkish hints could weigh on the local currency.
On Friday, the local unit fell to a new historic low as it breached the P62-a-dollar level for the first time after Middle East war woes and expectations for the Jackson Hole symposium buoyed the greenback.
It lost 37.7 centavos to close at P62.265 against the dollar on Friday, breaching its previous trough of P61.888 on Thursday, data on the Bankers Association of the Philippines’ website showed.
Its intraday low of P62.27 versus the greenback on Friday is now the lowest level the peso has ever touched.
Year to date, the currency is down by 5.58% or P3.475 from its 2025 close.
Meanwhile, week on week, the peso weakened by 59.5 centavos or 0.96% from its P61.67 per dollar finish on Aug. 20.
“The US dollar/peso (has been) also higher lately, after global crude oil prices corrected slightly higher, with Brent crude oil price at $89-per-barrel levels… on signs that diplomatic efforts toward an agreement over the Strait of Hormuz have hit fresh hurdles,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The peso weakened to new record lows ahead of likely hawkish remarks by Fed Chair Warsh… in the Jackson Hole Symposium,” a trader said via Viber message.
For this week, the peso’s weakness against the dollar may persist as markets turn their attention to the upcoming August inflation report and the Fed’s potential rate hike later this year.
Speaking at the annual Jackson Hole Symposium on Friday, Federal Reserve Chairman Kevin Warsh hinted at a possible rate hike as he noted that the United States’ inflation remains sticky above their 2% target.
This marked a more hawkish shift from his remarks during the Fed’s policy review in July, where they left their benchmark rates unchanged for a fifth straight meeting at the 3.5%-3.75% range.
The market will also react to the upcoming inflation report for August, with the local unit expected to continue trading around the P62 handle, the trader said.
A BusinessWorld poll of 20 analysts conducted last week yielded a median estimate of 6% for the August headline inflation, a deceleration from July’s 6.2% but sharply faster than the 1.5% clip a year ago.
This means inflation would ease to its slowest since 4.1% in March. However, it would also mark the sixth straight month that inflation blew past the Bangko Sentral ng Pilipinas’ (BSP) 3% target, bringing the year-to-date clip to 5.1%.
Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the peso could remain under pressure despite the BSP’s latest tightening move, with geopolitical risks also continuing to drive sentiment.
The central bank last week raised its key policy rate by 25 basis points (bps) for a third straight meeting to an over one-year high of 5%. Since its hiking cycle began in April, the central bank has so far lifted borrowing costs by 75 bps.
BSP Governor Eli M. Remolona, Jr. said they will continue tightening as needed to steer inflation closer to their target, with an expected growth recovery by the fourth quarter providing them more tightening space.
According to the central bank, inflation could still peak in the last quarter of the year as food inflation could run hot due to potential supply disruptions from the “Super El Niño” episode.
The Monetary Board will hold its last two meetings this year on Oct. 22 and Dec. 17.
In a note on Friday, MUFG Global Markets Research Senior Currency Analyst Michael Wan said the peso could strengthen in the near term on the back of expectations of another BSP rate hike, lower oil prices, and if the worst-case scenario for El Niño does not materialize.
“Nonetheless, the downside risks on global commodity prices are quite substantial and we don’t quite want to take a call on that,” he added. “At current USD/PHP (US dollar-Philippine peso) levels closer to 61.80 we could however see BSP coming in more to intervene in the markets, and so in the very near-term we think potential for USD/PHP to move higher from here is not that great.”
Mr. Ravelas expects the local unit to range between P61.90 and P62.30 against the greenback this week, while Mr. Ricafort sees it moving from P62 to P62.50.
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