Peso retreats to 7-year low

MANILA, Philippines - The peso nearly breached the 49 to $1 level yesterday amid the strengthening of the greenback on expectations that President elect Donald Trump would boost the US economy and raise interest rates.

The peso hit at an intraday low of 48.96 to $1 after opening weaker at 48.77.

The peso ended a trading week 29 centavos weaker to close at a fresh seven-year low of 48.95 from Thursday’s 48.66 to $1.

This was the lowest level since the peso closed at 48.995 to $1 on April 28, 2009.

The weakness of the currency was not unique to the Philippines as the dollar strengthened broadly on expectations that the policies of Trump would stoke inflation paving the way for the US Federal Reserve to raise interest rates.

 Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. earlier said monetary authorities are ready to provide liquidity to the market as needed amid the renewed risk aversion surrounding market surprise over the Trump victory.

 “We will continue to closely monitor developments and provide liquidity to the market as needed to address market price action on renewed global political risk,” Tetangco said.

 He explained cautiousness on a possible retreat by the US Federal Reserve from a rate hike next month is weighing on regional currencies including the peso.

 For his part, BSP Deputy Governor Diwa Guinigundo said the weaker peso is expected to contribute more inflationary pressures for the next two years.

 The BSP raised its inflation forecasts over the next three years. The central bank raised this year’s inflation forecast to 1.8 percent.

“So we are not concerned about the level of the exchange rate. It’s more on the volatility in the foreign exchange market that we have to monitor regularly. It is important that we keep the volatilities in check because that can affect the sentiment of the business community as well as the investors’ sentiment,” Guinigundo said.