Philippine Peso Nears 63 Per Dollar Amid Record Lows

MANILA, Philippines — The Philippine peso hovered near the 63-per-dollar level on Monday, extending its run of record lows as a resilient US currency and growing expectations of higher US interest rates weighed on the local unit. The peso gained 0.4 centavos from its previous close to finish at 62.586 per dollar. But it fell as low as 62.775 during the session, setting another intraday record before paring its losses. READ: Peso tagged as Asia’s ‘weakest link’ Trading volume eased to nearly $1.2 billion from $1.5 billion in the previous session. The peso touched a new record low even as the dollar struggled to hold on to gains against a basket of major currencies after a stronger-than-expected US jobs report on Friday, Reuters reported. Traders are now seeing a greater chance that the Federal Reserve could raise interest rates this month, with investors turning their attention to the latest US inflation data. “The peso reached new lows intraday as the stronger-than-expected US labor reports last Friday firmed views of a potential US policy rate hike this month, which boosted the greenback,” a trader said. Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., echoed that view and revised his trading forecast for the peso to 62.6 to 62.9 per dollar. Another trader said the peso’s latest decline had put 63 to the dollar “within striking distance,” though a breach of that level could still be avoided. “At these levels, the market will increasingly test the BSP’s (Bangko Sentral ng Pilipinas) tolerance for volatility, and the recent rate hike gives it more room to lean against disorderly moves,” the trader said. “The key question is no longer whether 63 can be touched, but whether the peso can stay there.” READ: BSP raises policy rate to 5%; peso sinks to new low The peso’s slide comes despite the BSP’s efforts to contain inflation and support the currency through higher interest rates. The central bank last month raised its benchmark rate by a quarter percentage point to 5 percent, its third increase since the current tightening cycle began. The BSP called the move a preemptive response to emerging inflation risks. The central bank expects inflation to average 6.1 percent this year, down from its previous forecast of 6.4 percent. But it sharply raised its inflation projection for 2027 to 5.4 percent from 4.5 percent, citing the risk of a severe El Niño episode and possible wage increases. READ: Trump’s Iran strategy: Could this become a forever war? The peso is now trading well beyond the 60-to-62-per-dollar range assumed by the Marcos administration for this year, underscoring the currency’s persistent weakness despite the BSP’s rate increases. Nomura Global Markets Research expects the central bank to raise its benchmark rate by another quarter point to 5.25 percent at its October meeting, while warning that further increases may be needed. The bank also expects core inflation, which strips out volatile food and energy prices, to continue rising through the end of the year. That could signal so-called second-round effects, in which higher prices become more persistent through wages and other costs, prompting the BSP to consider additional rate increases, Nomura said. INQ