MANILA, Philippines — The peso slumped to a new historic low, depreciating by 27 centavos to close at 57.43 to $1 from 57.16 last Thursday as it extended its losing streak to three straight trading days.
Several Asian currencies also hit multi-year lows yesterday, as the yuan weakened past the psychologically important seven-per-dollar level, while bets on a big US Federal Reserve rate hike next week boosted Treasury yields and kept dollar demand intact.
Thailand’s baht slid to a level not seen since December 2006, while the Taiwanese dollar slipped to its lowest since September 2019. South Korea’s won hit a fresh 13-1/2-year low.
Meanwhile, the local currency opened weaker at 57.35 before gaining strength to hit an intraday high of 57.32. However, it lost steam in afternoon trade, weakening to an intraday record low of 57.44.
Yesterday’s close erased the previous all-time low of 57.18 to $1 on Sept. 8.
Trading volume slipped by one percent to $900.66 million from Thursday’s $909.8 million.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the peso has depreciated by 6.41 or 12.6 percent since closing at 50.999 to $1 at the end of 2021.
He said the peso continued to weaken against the greenback after the World Bank warned that the global economy may face a recession in 2023 due to the aggressive monetary policy tightening of central banks which still may not be enough to bring down soaring inflation.
The World Bank, he said, also noted the most synchronized rolling back of monetary and fiscal stimulus measures by central banks around the world in about 50 years.
Ricafort said the peso also weakened ahead of the much anticipated meeting of the US Federal Reserve where it is expected to deliver another aggressive 75-basis-point hike despite inflation cooling slightly to 8.3 percent in August.
Ricafort said the Bangko Sentral ng Pilipinas (BSP) is expected to maintain its hawkish stance with another aggressive rate increase during its scheduled rate-setting meeting on Sept. 22.
According to the bank economist, the continued depreciation of the peso against the dollar may add to inflationary pressures through higher costs of imports.
This, he added, would require more aggressive local policy rate hikes to help stabilize the peso exchange rate, and, in turn, help better manage both inflation and inflation expectations.
Ricafort said September is the tail-end of the typical third importation season amid the seasonal peak in demand for many businesses and industries in the fourth quarter.
BSP director Sittie Hannisha Butocan said the peso, which averaged 53.3 to $1 from Jan. 3 to Sept. 15, remains in line with the peso assumption of 51 to 53 per $1 of the Cabinet-level Development Budget Coordination Committee.
The yuan, meanwhile, had fallen below seven per dollar only twice since the global financial crisis of 2008, and its crossing of the level could now stoke fears of capital outflows.
But several state media outlets published commentaries that sought to stabilize market expectations by playing down any significance of the level.
“We are in a very strong dollar environment, which is very hard to go against, and so (the People’s Bank of China) won’t be looking to defend any particular level rigorously.... It’s
really all about managing the pace of the moves,” said Khoon Goh, head of Asia research at ANZ.
The won, the worst performing emerging-market currency in Asia so far this year, fell 0.2 percent and was on course for a sixth straight weekly decline against the dollar.
Verbal warnings and likely dollar selling from the country’s foreign exchange authority on Thursday appeared to have provided some temporary relief to the won. But analysts have warned that defending currency levels is very costly and, if unilateral, unlikely to be effective.
A finance ministry official said the government would meet with major exporters and importers early next week to prepare measures to stabilize the dollar-won currency market.
Markets in Malaysia were closed for a holiday. India’s rupee fell 0.2 percent, while the Indonesian rupiah hit a more than six-week low.
“So long as (the yuan) remains weak, you’re quite likely to see Asian underperformance in aggregate,” said Galvin Chia, emerging markets strategist at NatWest Markets.
He expects the weakness to be centered around currencies such as the South Korean won, Taiwan’s dollar and the Malaysian ringgit.