Philippine peso weakens to new 11-year low

MANILA, Philippines – The Philippine peso weakened against the United States dollar to hit a new 11-year low, amid higher demand for the dollar and talks of a new chief at the US Federal Reserve.

The local currency on Thursday, October 19, shed 12.5 centavos, closing at P51.530 to $1. This was from the previous day's P51.405 to $1.

The Philippine peso had opened at P51.43 against the greenback on Thursday and hit an intraday high of P51.38. (READ: Philippine peso now at its weakest in a decade)

Thursday's close is the weakest since August 24, 2006, when it closed at P51.60 against the US dollar. 

BSP Deputy Governor Diwa Guinigundo said the depreciation of the peso could be attributed to the effects of higher corporate demand for imports and trade financing.

He also cited US President Donald Trump's recent meeting with Stanford University economist John Taylor as a possible replacement for US Fed Chairperson Janet Yellen, whose term is set to expire in February.

"Rumors about a possible hawkish Fed chairman in John Taylor appeared to have spooked the market. There seems to be some nervousness in the market," Guinigundo said.

Consistent with trend

The BSP official said the peso movement continues to be consistent with the trend. (READ: How a Fed rate hike impacts the Philippine economy)

Guinigundo said the Philippine peso's depreciation remains "manageable and its impact on inflation has considerably gone down."

"In short, our latitude in allowing greater flexibility in the exchange rate has widened. When the cycle reverses, we should see some upward shift," he added.

For Guian Angelo Dumalagan, market economist at the Land Bank of the Philippines, the depreciation was affected by the hawkish statement from New York Fed president William Dudley.

"The peso further weakened today likely due to hawkish remarks from Dudley, who affirmed views of more US rate hikes ahead. The peso fell against the dollar, despite softer US housing data and caution ahead of the ECB (European Central Bank) meeting next week," Dumalagan said. – Rappler.com