Philippine peso slumps to weakest dollar exchange rate since 2005

Philippine peso
The Philippine peso hit a new low today.

The Philippine peso has depreciated against the dollar for the third consecutive day, closing at its weakest level in nearly 13 years.

The local currency today (Thursday, September 6) lost 2.5 centavos to close at 53.80 to the dollar, from 53.55 yesterday, its weakest since it closed at 53.985 on December 7, 2005.

BDO Unibank chief strategist Jonathan Ravelas said the currency’s weakness “stems from a series of unfortunate events such as importers’ demand for the US currency, rising inflation, and fears of contagion from an emerging market rout”.

“Ladies and gentlemen, the captain has turned on the fasten seat belt sign. We are now crossing a zone of turbulence. Please return your seats and keep your seat belts fastened. Thank you,” he said.

As we reported yesterday, the Philippines experienced its highest level of inflation for nine years last month. 

Philippine Statistics Authority data showed the monthly rate had reached 6.4 per cent, the highest since March 2009. 

“Today’s sharp depreciation of the Philippine peso was still attributable to the stronger-than-expected local inflation report yesterday,” Guian Angelo Dumalagan, economist at the Land Bank of the Philippines, said.

“On the global front, lingering trade uncertainties concerning the US, Canada and China as well as emerging markets’ anxieties drove strong demand for the dollar.”

Bangko Sentral ng Pilipinas (BSP — the central bank) Deputy Governor Diwa Guinigundo said the peso’s weakness was more about the dollar’s appreciation.

“The dollar strengthened yesterday. So even if you don’t do anything, the peso will show some depreciation,” he said.

“Is this unique? Is this something that we should be worried about? It should concern us, but this is part of the essence of a flexible exchange rate.”

Meanwhile, the BSP announced today that business outlook on the economy has become less optimistic, with the overall confidence index declining to 30.1 per cent, the lowest since the first quarter of 2010.

“Respondents attributed their weaker sentiment during the third quarter to increasing prices of basic commodities in the global market, augmented by the effects of the implementation of the Tax Reform for Acceleration and Inclusion Law on prices of domestic goods,” the BSP said.

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