Peso loses more ground vs dollar

MANILA, Philippines – The peso lost another two centavos yesterday to close at a fresh eight year low amid the continued strengthening of the dollar due to the impending interest rate hike in the US next month.

The local currency opened stronger at 49.79 and strengthened further to hit an intra-day high of P49.71 to $1 before losing steam to hit an intra-day low of 49.92 to $1.

In the end, the peso closed at 49.85 from Monday’s 49.83 to $1. This was the weakest level since the local currency closed at 49.99 against the greenback in Nov. 20, 2008.

Trading volume increased 33 percent to $520 million from Monday’s $391.6 million.

Tim Condon, head of research for Asia at ING Bank, said in its latest research note the it has revised its year-end forecast for the peso to 49.50 to $1 instead of 48.40 to $1.

“We expect the greater two-way risk the Philippine peso has exhibited this year to persist,” Condon said.

He pointed out the country’s overall balance of payments position was in the red to the tune of $183 million in October.

“Such deficits were rare when the current account was in surplus. We expect they’ll become less so with the current account sliding toward deficit,” he said.

Condon said local borrowers have to pay for increased reliance on the rest of the world to finance investment.

Metrobank analyst Pauline May Ann Revillas said the peso is expected to trade this week within the 49 to 50.50 range.

“The dollar bull run continues, with some currencies trading at multi-year lows against the greenback. With the expected Fed rate hike just around the corner, expect volatility to continue as players adjust for positioning and profit taking,” she said.

Revillas said the Bangko Sentral ng Pilipinas is becoming more aggressive toward the pivotal 50 to $1 level.