Photo illustration of US dollar to PH peso exchange in this photo taken on September 30, 2022. Gigie Cruz, ABS-CBN News
MANILA — The peso clawed back to P62.835 against the dollar at the close of trade on Tuesday, after falling to P62.905 versus the greenback in intraday trade.
The peso closed at a historic low of P62.86 to $1 the day before.
An economist has said that the peso could soon hit another historic low of P63 to the US dollar, as a rise in US Federal Reserve interest rates can put even more pressure on the peso.
Peso could hit 63 to the dollar within the week - economist
Jonas Ravelas, Senior Adviser at Reyes Tacandong & Co, said the US Federal Reserve may hike interest rates this month, thereby affecting the Philippine peso.
“Given the impact of renewed tensions in the Middle East… I think the pressure on inflation is much higher now, and probably…the Fed will probably at least hike by a quarter whether it happens this September,” he said.
“But given the recent data out of the U.S. with inflation at 3.4 (percent), which is way higher than the long-term inflation of 2 percent, and it's been more than a decade that inflation is above 2 percent, so they have to move,” he noted.
“So what I fear is that probably they could they could add one (rate hike), given that their guidance will be a hike this September and probably one more towards the fourth quarter,” he said.
Ravelas said that in the near term, the peso could further weaken to between 63 and 63.50 per dollar because a US rate hike would make the greenback even stronger. This, in turn could push the Bangko Sentral ng Pilipinas to hike rates quickly.
“So, what do we expect from the BSP? Probably an off-cycle, 25 to a 50 basis point, to probably anchor inflation expectations moving forward,” he said.
Analysts have warned that the weakening peso, coupled with rising world oil prices, may stoke inflation.
On the other hand, a stronger dollar may initially benefit families of overseas Filipino workers, as they can get more pesos for every dollar sent. But inflation may also eat into their purchasing power.
Prior to the attack of the US and Israel against Iran at the end of February, the peso was on a winning streak, clawing back to P57.665 on Feb. 27. Since the start of the US-Iran war, the peso has depreciated by P5.17, or almost 9 percent, against the dollar.