THE PHILIPPINE PESO on Thursday reached a historic low of P59-per dollar for the first occasion in over two years as the dollar maintained its upward trend.
The peso finished at P59 against the dollar at the close of trading, a decline of nine centavos from its P58.91 closing on Wednesday.
This signified the first instance the peso has reverted to the P59-per-dollar mark since Oct. 17, 2022.
The peso commenced Thursday’s trading session at P58.93 compared to the dollar. Its best intraday performance was P58.92, while its least favorable position was its final close of P59.
Dollar transactions fell to $842.68 million from $1.09 billion on Wednesday.
“The USD/PHP weakness is a result of the recent increase in (10-year US Treasury yields), reflecting Trump 2.0 policies and driving the dollar higher,” noted Jonathan L. Ravelas, senior consultant at the professional services firm Reyes Tacandong & Co.
Analysts have cautioned that US President-elect Donald J. Trump’s suggested tariffs and tax reductions could fuel inflation and potentially hinder the US Federal Reserve’s easing cycle.
Reuters mentioned that markets are estimating a 52% probability of a 25-basis-point (bp) cut at the Federal Reserve’s December gathering, down from 82.5% a week earlier, according to CME’s FedWatch Tool.
A Reuters survey indicated that the majority of economists anticipate the Fed will lower rates at its December meeting, with less aggressive reductions expected in 2025 compared to predictions made a month prior due to concerns regarding elevated inflation stemming from Mr. Trump’s policies.
According to one trader, the peso’s decline was additionally attributed to the “influence of a stronger dollar and the uncertainty concerning the Fed’s direction under Trump, along with mixed signals from the Bangko Sentral ng Pilipinas (BSP).”
“This also reflects projections of rate reductions by the BSP, which could continue into 2025. The imminent risk is P60,” Mr. Ravelas added.
BSP Governor Eli M. Remolona, Jr. this week provided conflicting signals, stating that the Monetary Board could either maintain or decrease rates in its Dec. 19 policy meeting.
He mentioned that inflationary pressures might necessitate a pause, while growth that is weaker than anticipated could lead to another reduction in rates.
Since August, the BSP has implemented a total of 50 bps in rate cuts, lowering the benchmark to 6%.
“The peso continued to weaken, closing at the 59 level, amid ongoing uncertainty regarding the composition of Trump’s economic team,” remarked the second trader.
Mr. Trump’s list for a Treasury secretary candidate has expanded to include Apollo Global Management CEO Marc Rowan and former Federal Reserve Governor Kevin Warsh, according to Reuters.
Mr. Trump announced he would appoint Howard Lutnick, the chief executive of Wall Street brokerage firm Cantor Fitzgerald, as the head of the Commerce Department.
The second trader also highlighted “increasing tensions between Russia and Ukraine creating greater safe-haven demand for the dollar.”
Russia fired an intercontinental ballistic missile from its southern Astrakhan region during a morning offensive on Ukraine on Thursday, according to Reuters, citing Kyiv’s air force. This marked the first occasion Russia has deployed such a powerful, long-range weapon during the conflict.
The air force reported the missile launch after Ukraine targeted locations within Russia using US and British missiles this week, despite warnings from Moscow that such actions would be perceived as a significant escalation in the ongoing 33-month conflict. — Luisa Maria Jacinta C. Jocson with Reuters
