The continued depreciation of the Philippine peso against the US dollar does not mainly reflect fundamental weakness in the local currency, an economist from the Asian Development Development (ADB) said.
During the Asian Impact Webinar on Wednesday, Sept. 21, Abdul Abiad, ADB Macroeconomic Research Division director, said the weakness of the peso, which depreciated by about 13 percent so far, was “not at the extreme end.”
“It's actually very much close to the the average for the region,” Abiad told reporters when asked about his assessments of the local currency’s performance against regional peers since the start of the year.
“The depreciation in the Philippine peso reflects not so much weakness in the peso but strength of the dollar. And so it's really again driven by the US Fed tightening that we've just talked about,” he added.
On Wednesday, the peso depreciated to a new intraday low of P57.985 vis-à-vis the US dollar. Year-to-date, the peso weakened by P6.49, or 12.73 percent, from its end-2021 close of P50.99.
Abiad said the continued depreciation of the peso would depend a lot on what will happen in the US in terms of inflation pressures.
He noted that US headline inflation is already declining, but its core was still on the upside based on the latest August number.
“It's likely that the Fed will continue hiking by at least 75 basis points in their meeting within this week and and that will continue putting pressure on currencies in our region to depreciate including on the Philippine peso,” Abiad said.