MANILA – The Philippine peso slid back to P51 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 P51 flat versus the greenback from P50.65 on Friday. This is its worst performance since March 26 last year, where the peso closed at P51.07 against the dollar.
Economists attribute this to officials of the United States (US) Federal Reserve adopting a more hawkish tone regarding the American central banking system’s monetary policy in the months ahead.
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 one-month highs and also among six-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 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 health pandemic and policy response is weighing on investors’ confidence.
It expects the currency to trade between P49 to P52 against the dollar in the next three to six months.(CNN)
