Ten days after breaching the P57 level, the peso depreciated to a new low of P57.43 vis-à-vis the US dollar on Friday, Sept. 16, after hitting an intraday low of P57.44.
The local currency lost 27 centavos from its previous close of P57.16. From its end-2021 close of P50.99, the peso has depreciated by P6.44 or decreased in value by 12.63 percent.
Based on Bankers Association of the Philippines data, total volume of spot market transactions Friday reached $900.66 million from $909.8 million Thursday.
By the end of the day, the weighted average rate stood at P57.363 versus P57.103 on Sept. 15.
The peso first broke P57 last Sept. 6 but it hit this level in an intraday low on Sept. 5.
The peso is expected to weaken further given the country’s substantial trade deficit while the increased interest rates in most major countries such as the US are also adding exchange rate pressures.
The Bangko Sentral ng Pilipinas (BSP) has said that the aggressive US Federal Reserve rate hikes, which it has mirrored since May this year to reanchor domestic inflation expectations, will continue for some time.
Rising interest rates will result in volatile currencies especially with a risky external environment.
The spot market is also anticipating another rate increase from the BSP next week, when the Monetary Board meets on Sept. 22 for its policy rate meeting.
As of Aug. 18, the BSP has increased its policy rate by 175 bps (basis points) to 3.75 percent. The market expects another rate hike of at least 25 bps to 50 bps.
The BSP does not target a peso-US dollar exchange rate but it will intervene in the exchange rate market to smoothen the local currency volatility and ease depreciation pressures.