Peso sinks further to fresh three-year low

The Philippine peso depreciated against its US counterpart on Thursday to a fresh three-year low, following the Federal Reserve’s most aggressive rate hike in nearly three decades.

The local currency closed Wednesday at P53.47:$1 or 3.5 centavos weaker than Wednesday’s finish of P53.435:$1.

This is the worst performance of the Philippine peso in over three years since October 31, 2018 when it closed at P53.535:$1.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort attributed Thursday’s depreciation to the 0.75 basis point rate hike in the United States, the biggest since 1994.

“[H]igher interest rates increase the attractiveness/allure of the US currency,” he said in a mobile message.

Fed chair Jerome Powell defended the interest rate hike as he said it was “essential” to tame inflation, adding that the central bank has the tools it needs and the resolve to restore price stability.

Ricafort noted that the latest estimates of the Fed and the Federal Open Market Committee also show that the Funds Rate could reach 3.40% by the end of the year, versus the current target range of 1.50% to 1.75%.

This is seen to grow even further to 3.80% by the end of next year, before being eased to 3.40% by the end of 2024.

“Peso also weaker after US Treasury yields went up recently, with the 10-year US Treasury yields at among 11-year highs at 3.38%,” Ricafort said in the same message.—AOL, GMA News