Peso depreciates to P58 vs dollar, new record low ahead of Fed decision


Posted at Sep 21 2022 04:23 PM

MANILA - The Philippine peso fell to P58 against the US dollar on Wednesday, Sept. 21 as markets around the world await the US Federal Reserve's decision on another interest rate hike, data from the Bankers Association of the Philippines showed.

The new record low breached Tuesday's close which was at P57.48.

With the outperforming US dollar, the peso hitting a low of P60 is "definitely possible," First Metro Securities’ Equity Research Deputy Head for Retail Royce Aguilar told ANC.

It could normalize in the fourth quarter on the back of increased remittances. But this quarter, the depreciation is caused by the import season and the aggressive Fed, Aguilar said.

"We’re hoping that P58 is the peak before normalizing to about P56 by year-end but if you take a look at the phase of the Fed raising rates, there’s still upside to that in terms of the US dollar. It would be possible that the peso could reach around P60. It’s possible, definitely," he said.

The Fed is expected to announce another interest rate hike to cool down inflation. Meanwhile, the Bangko Sentral ng Pilipinas will hold its monetary-policy setting meeting on Thursday, Sept. 22. 

Despite successive breaches in record lows, the peso is not the worst performer in the region, Asian Development Bank's Director of the Macroeconomic Research Division Abdul Abiad said in a briefing.

Abiad said the peso has depreciated by 13 percent so far, but it was "not at the extreme end." 

"It is close to the average for the region. It is driven by the Fed tightening. Whether that will continue depends on US inflation. It is likely the Fed will continue hiking, that will continue putting pressures on currencies to depreciate, including the peso," Abiad said. 

But analysts agree that the US dollar rally is likely to continue.

"I think the dollar strength is very likely to continue… If the Fed continues for the moment in their very hawkish path, which as I’ve mentioned, seems likely, then all the drivers of the dollars that we’ve seen over the last several months are likely to continue," Ben Powell, the APAC Chief Strategist of global asset manager Blackrock Investment Institute, told ANC. 

He said markets in Asia should be prepared for the US dollar's continued rally to all time highs.

Previous peso-dollar closing rate:

  • Sept. 16 = ?57.43
  • Sept. 19 = ?57.40
  • Sept. 20 = ?57.48

-- with reports from Edson Guido, Warren de Guzman and Raine Musngi, ABS-CBN News

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