Peso weakest in 16 years, closes at P54.985:$1

The Philippine peso sank to its weakest closing level in over 16 years after it closed at P54.985 to a dollar on Friday.

The local currency closed P0.285 weaker than Thursday’s finish at P54.7: $1. This is the worst performance of the peso since October 27, 2005, when it ended at P55.08 to a dollar.

The peso plunged for the fifth straight week by P1.235 or 2.3%. Since the start of the year, it had already depreciated against the US dollar by 7.8% or P3.986.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said Friday’s depreciation was due to the latest remarks of the US Federal Reserve, indicating higher interest rates to rein in their country’s 40-year-high inflation.

“The peso also weakened after continued hawkish signals from Fed Chair Jerome Powell, who reiterated that his commitment to fight inflation is unconditional and from Federal Reserve Governor Michelle Bowman, who supports raising Fed rates by +0.75 again in July 2022 and a few more +0.50 Fed rate hikes after that,” said Ricafort.

The Federal Reserve last week announced its most aggressive interest rate increase in nearly three decades, noting that it is prepared to do so again in its next meeting.

For his part, Ricafort said a weaker peso exchange rate may add to the cost of imported fuel products and other commodities which may bump the Philippines’ headline inflation.

He also said it may affect the country’s debt stock as the peso equivalent of the government's foreign debts and loans rises.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno previously said the latest ratio remains at manageable levels, noting that it remains among the lowest compared with other ASEAN member countries.

Ricafort said the current financial market situation would remain as long as the conflict between Russia and Ukraine drags on.—Sundy Locus/AOL, GMA News