MANILA – The peso weakened further against the dollar on Monday, hovering at its lowest level in a decade as the dollar strengthened on corporate demand ahead of rate increases in the US.
The peso closed at P50.23 to the dollar, its weakest since Sept. 2006. It was also the steepest decline at close from the previous trading day since Dec. 15, according to Bloomberg data. The peso closed at P50 on Friday.
Bangko Sentral ng Pilipinas does not target a specific exchange rate level but is mindful of excessive volatility, Governor Amando Tetangco said.
The peso could weaken to P50.50 by March and “possibly” to P51 by mid-year, as investors keep close watch on the tightening pace of the Federal Reserve, said BPI lead economist Jun Neri.
The depreciation is “modest” and “within a comfortable range,” Neri told ANC’s “Market Edge with Cathy Yang.”
The P50 per dollar level was a key threshold, since the peso had held that level "partly because of official intervention," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia.
"I think the market's been shaken a little bit," Ji said, referring to the peso's fall on Monday.
The peso's drop below the key support level appears to have caught some market participants off guard, and is a bearish signal for the peso, he added.
Separately, analysts at Maybank said in a research note that there was some market chatter of selling in 10-year Philippine bonds.
Analysts had predicted the peso to lose ground, with the Fed expected to hike interest rates as many as three times this year. Such a move would drive funds back to the US and out of the Philippines and other emerging markets, increasing demand for dollars.