Philippine peso declines to P58.635:$1 as US inflation fears persist

  • , by Balikbayan Store
  • 2 min reading time

The Philippine peso continued its downward trend against the US dollar, hitting its lowest point in over 18 months on Thursday. The peso closed at P58.635:$1, weakening by 21.5 centavos from the previous day’s finish of P58.42:$1. This marks its weakest performance since November 3, 2022, when it closed at P58.8:$1.

The decline comes as US Treasury yields reached their highest levels in a month, with the 10-year Treasury yield hitting a four-week high and the two-year note yield also increasing.

"Upside moves today after US yields continued to rise overnight, PHP weakened along with regional currencies," commented Security Bank Corp. chief economist Robert Dan Roces. "Dollars strengthened across with higher treasury yields and recent hawkish Fed speak. Market a bit on the edge with sticky inflation potentially indicating higher rates for longer. US GDP data tonight will provide direction."

This depreciation occurs amid signals from Federal Reserve Chair Jerome Powell that there may be a delay in policy rate cuts due to persistent inflation in the US. Locally, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. suggested a potential rate cut by August, indicating a less hawkish stance from the central bank.

BSP Senior Assistant Governor Iluminada Sicat expressed optimism, stating, "I think this is only temporary and eventually, once things clear up, it will be the fundamental that will determine the level of exchange rate."

Roces's observations were echoed by Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort, who noted that the peso’s decline was also influenced by the local equities market's performance. "The peso also lower after the recent declines in the local stock market, PSEi, to new 5.5-month lows or since December 13, 2023," he said.

At the closing bell, the Philippine Stock Exchange index (PSEi) lost 39.66 points or 0.62% to 6,371.75, while the broader All Shares index shed 26.17 points or 0.76% to 3,425.57. More than 666.587 million shares valued at P5.987 billion changed hands, with decliners outnumbering advancers 132 to 57, while 52 issues remained unchanged.

Regina Capital Development Corp. head of sales Luis Limlingan attributed the decline in the PSEi to a sell-off ahead of the MSCI rebalance and weak US Treasury action. "The odds for the Fed to raise rates currently are quite low, but not completely off the table. In any case, the Fed is said to need much evidence before becoming confident to start easing," he noted.

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