MANILA, Philippines – The Philippine peso fell to an 11-year low against the US dollar as it breached the P52 level, with widening trade deficit continuing to put pressure on the local currency.
The peso ended Wednesday’s session at P52.12 versus the greenback, 14 centavos weaker than its P51.98:$1 close on Tuesday.
This is the peso's weakest finish in 11 years or since it closed at P52.17 per dollar on July 21, 2006.
The peso opened Wednesday’s session at P52.03 versus the dollar, while its best showing was at P51.91.
"Strong economic growth in the Philippines is fueling a surge in imports, resulting in record trade deficits," ANZ Banking Group head of Asia research Khoon Goh said in a market commentary posted on Twitter.
"Further peso weakness likely as the current account balance... slips further into deficit," he added.
Deficit in the country's balance of trade in goods in December 2017 reached a record high $4.017 billion, bringing the full-year trade deficit to $29.79 billion, the largest on record.
The ballooning trade gap came as demand for imports of construction-related goods gets a boost from President Rodrigo Duterte's P8.44-trillion infrastructure program.
The increasing capital goods imports due to the infrastructure boom brought the country's current account surplus to a deficit, which is expected to worsen and undermine the peso.
Some economists say the Philippines’ weakening current account position makes the country vulnerable once the Fed picks up its pace of US rate hike.
The Bangko Sentral ng Pilipinas has revised downward the projected current account deficit to $100 million for 2017, and estimates 2018's gap swelling to $700 million.
For 2018 to 2022, the interagency Development Budget Coordination Committee said it expects an exchange rate of P49 to P52 against the dollar, adjusting it from a previous projection of P48-P51.
"One major data release is US inflation later tonight. There is uncertainty in the pace at which the US Fed will raise interest rates that depends on the level of inflation," Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, Inc., said in an interview.