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Manila Bulletin devider Business devider Banking & Finance devider Peso slumps to two-year low vs dollar, closing at P59

Peso slumps to two-year low vs dollar, closing at P59

Published Nov 21, 2024 11:06 am

The peso has weakened against the US dollar for the third consecutive trading day, closing at P59 on Thursday, Nov. 21, marking its lowest value in two years.

According to data from the Bankers Association of the Philippines, the peso depreciated by 0.09 centavos from Wednesday's closing rate of P58.91 against the greenback. The last time the peso was this weak was in late September and early October 2022.

During the session Thursday, the peso opened at P58.93 against the dollar, reached a high of P58.92, and dipped to a low of P59.00.

The trading volume for dollars also decreased to $842.68 million on Thursday,  from $1.094 billion on Wednesday.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said the local currency’s weakness was due to geopolitical risks associated with the Russia-Ukraine conflict and market expectations of potential US Federal Reserve rate cuts.

Ricafort noted that this movement comes as the US dollar strengthens against major global currencies and US Treasury yields remain elevated.

"The US dollar/peso exchange higher recently amid some geopolitical risk related to the Russia-Ukraine war lately," Ricafort said.

He added that Ukraine's first strike using US missiles in Russia and Russian President Vladimir Putin's reaffirmation of Russia's nuclear doctrine contributed to the peso's decline.

Despite some positive factors, such as lower global crude oil prices and the anticipated seasonal increase in cash remittances, the peso faced downward pressure.

Ricafort said that global oil prices are at 11-month lows, which could help keep inflation in check and potentially justify future rate cuts by the central bank.

Market participants are also factoring in the potential for increased remittances in December, as families typically receive more funds for holiday-related expenses.

However, these positive factors were offset by the geopolitical tensions and market expectations of fewer Fed rate cuts following Trump's victory in the US presidential elections.

Earlier this week, the Bangko Sentral ng Pilipinas (BSP) said that it was closely monitoring the situation but is not particularly concerned about the current depreciation.

BSP Governor Eli Remolona Jr. said the central bank was primarily focused on the potential inflationary impact of a sharp and sustained decline in the peso’s value, adding that the BSP does not intervene in daily currency fluctuations.

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