Peso plunges to near 11-year low on hawkish Fed comments

The Philippine peso on Wednesday sank to its lowest level in nearly 11 years against the dollar as "hawkish" comments by Federal Reserve chief weighed on the local unit.

The local currency lost 21 centavos to close at P50.500:$1 from 50.290 on Tuesday.

It was lowest level for the peso since September 11, 2006, when the pair closed at P50.540:$1.

"The hawkish comments of Fed Chair Yellen put more pressure on the peso," First Grade Finance Inc. managing director Astro del Castillo told GMA News Online.

"The peso is actually expected to depreciate further this year due to the likelihood of more rate hikes in the US," Del Castillo noted.

According to a report by Reuters, Fed Chair Janet Yellen said she does not believe there will be another financial crisis for at least as long as she lives, thanks largely to reforms of the banking system since the 2007-09 crash as she reiterated the US central bank's stance on increasing interest rates gradually.

"The peso depreciated today, after Fed Chair Yellen affirmed the US central bank's plan to hike interest rates gradually, despite declining inflation expectations," Guian Angelo Dumalagan, market economist at the Land Bank of the Philippines, said in a separate commentary.

Union Bank of the Philippines chief economist Ruben Carlo Asuncion noted traders are wary of position taken by the Fed. "It's from the hawkish comments of US Fed officials, particularly Fed Chair Yellen, that the US economy can take on higher interest rates," he said. — VDS, GMA News