MANILA - The Philippine peso fell to a new record low against the US dollar on Tuesday while the Philippine Stock Exchange Index also tumbled.

The peso weakened to its new all-time low of P58.99 against the dollar, data from the Bankers Association of the Philippines showed. The peso dipped to as low as P58.995 against the dollar during intraday trading.

Analysts said global risks, high inflation and the policy tightening of the US Federal Reserve, among others, weighed down the peso and local stocks.

Asian currencies, including the peso, are likely to continue to decline as long as the Fed proceeds with more interest rate hikes that in turn, will widen the interest rate differential, Manulife Investment Management Head of Macro Strategy Sue Trinh said on Tuesday.

"There are many structural factors driving the US dollar higher right now, growth in interest rate differential, tighter global liquidity is also very supportive of the US dollar…with that persistent dollar strength backdrop, the risk remain on the upside for the dollar against Asian currencies," Trinh said.

US Federal Reserve Chair Jerome Powell has warned of more rate hikes in the near term.

Another off-cycle BSP rate hike is possible, BPI lead economist Jun Neri said. He noted that the is US set to hold its monetary policy-setting meeting in early November, ahead of the Bangko Sentral ng Pilipinas' policy-setting meeting on Nov. 17.

In June "we were caught between two meetings of the FOMC [Federal Open Market Committee] with a much lower policy rate [adjustment]," Neri said. The BSP announced a suprise 75-basis point rate hike in July.

The BSP in total raised the country's benchmark borrowing rate by 225 basis points this year to 4.25 percent.

Meanwhile, First Metro Securities Consultant Aaron Say told ANC that historically the "PSEi takes a hit every time the peso-dollar depreciates.”

The PSEi declined by 240.16 points or 3.84 percent on Tuesday to 6,020.07, data from the Philippine Stock Exchange showed. It fell below the 6,000 level in intraday trading.

Tuesday's close is also the lowest for the year, so far, and also the lowest since Oct. 19, 2020, PSE data showed.

Market volatility is also expected to continue until the end of the year due to difficult trading conditions caused by stagflation fears, bearish sentiments and the aggressive tightening of the US Fed, Trinh said.

"We do continue to anticipate choppy trading conditions with the market caught in a tug of war between bear sentiments, ongoing concern on the Federal Reserve tightening, as well as the longer term economic ramifications and downward earnings revision... I wouldn’t be surprised to see very large volatility in very wide ranges," she said.

• US Fed raises key interest rate as recession fears mount
• Gov't bets on holiday remittances, 'pamasko' to stabilize peso

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