MANILA -- The peso and the main stock index fell on Friday, tracking declines in emerging markets and with investors concerned over faster-than-expected inflation.

The peso was closed at 53.73 to the dollar from a high of P53.975, holding at its lowest level since December 2005, according to central bank data. The Philippine Stock Exchange Index was down 0.5 percent to 7,598.64, paring early losses.

Bangko Sentral ng Pilipinas Governor Nestor Espenilla said he would "take all actions necessary to deal with speculative activity by market participants."

"The currency's weakness stems from a series of unfortunate events such as importers’ demand for the US currency, rising inflation, and fears of contagion from emerging-market rout," BDO Unibank chief market strategist Jonathan Ravelas told ABS-CBN News.

"This phase is a turbulence, but there’s a silver lining. You just have to wait it out. During this time, patience is a virtue that we need to have," he said.

The peso could get a lift from seasonal dollar remittances ahead of the Christmas season, Ravelas said.

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Inflation hurtled to 6.4 percent in August, smashing government and market forecasts and climbing to its highest in nearly 10 years.

Food inflation zoomed to 8.5 percent as the monsoon hit agriculture output. Vegetable prices alone rose 19.2 percent.

Espenilla said he would take "strong immediate action using the full range of instruments in its toolkit" to address inflation.

The BSP has raised the benchmark borrowing rate this year to 4 percent from 3 percent and analysts said he could increase it by another 50 basis points at the Monetary Board's next meeting on Sept. 27.

"The follow-through actions will also address other threats to higher inflation such as excessive exchange rate volatility not consistent with underlying macroeconomic fundamentals in order to ensure that inflation returns to its 2-4 percent target over the policy horizon," he said.