The Philippine peso fell to its lowest level in 18 months, closing at P58 against the U.S. dollar. The continued strength of the greenbacks and weak balance of payment data dragged the local bourse and erased gains from the previous trading day.
Immediately, Bangko Sentral ng Pilipinas governor Eli Remolona Jr. warned the central bank would intervene "when necessary to smoothen excessive volatility and restore order during periods of stress." This is the worst peso showing in 18 months since the P58.275:$1 closing on November 8, 2022.
"The peso weakened beyond 58 to the U.S. dollar today, in line with other regional currencies. The dollar continued to strengthen as the Federal Reserve signaled delay in cutting interest rates," Remolona said.
Last week, Federal Reserve chairman Jerome Powell signaled that bankers must wait longer for lower borrowing costs. He explained that while inflation is projected to fall, he did not see any indicators that showed a reason to change the current stance on monetary policy.
Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort pointed to the latest balance of payment (BOP) data showing a reversion to a deficit in April, which influenced the peso's weak performance.
"It is important to note that the U.S. dollar/peso exchange rate already posted a bigger increase compared to most ASEAN currencies since the start of 2024 (+5.2%), and since the Russia-Ukraine conflict started on February 22, 2022 (at +14%)," he said.
Last Thursday, Remolona said the BSP is now "less hawkish," as the Monetary Board kept policy rates unchanged for the fifth straight policy meeting but hinted at the possibility of easing rates as early as August.
Moving forward, Remolona said the BSP will continue to allow the foreign exchange market to function but is ready to intervene when necessary.
"The BSP continues to monitor the foreign exchange market but allows the market to function without aiming to protect a certain exchange rate. Nonetheless, the BSP will participate in the market when necessary to smoothen excessive volatility and restore order during periods of stress," he said.
Meanwhile, the Philippine Stock Exchange index (PSEi) ended lower by 0.74 percent at 6,633.66, while All Shares declined by 0.36 percent to 3,535.77.
Philstock Financials, Inc. research and engagement officer Mikhail Plopenio said investors' worry over a weaker peso against the U.S. dollar dragged the local bourse's performance.
"The Philippine peso breached the PHP58-per-dollar mark, the lowest in nearly two years. Also, the lack of strong positive leads weighed on the market," Plopenio said.
Except for Services, which grew by 0.77 percent, the rest of the sectoral indices shed shares on Tuesday's trading.
The biggest losses came from the Property counter, down by 1.28 percent. This was followed by Holding firms, down by 1.10 percent; financials, down by 1.09 percent; mining and Oil, down by 0.53 percent; and Industrial, down by 0.53 percent.
Decliners outpaced advancers at 99 to 86, with 48 counters left unchanged.
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