MANILA, Philippines – The Philippine peso depreciated further to P50.23 against the dollar on Monday, February 20, its weakest performance in a decade, weighed down by the political uncertainties in Europe and optimism ahead of America's tax plan.
Monday's close is the weakest since the P50.32:$1 level recorded on September 26, 2006.
"The US dollar continued to strengthen against emerging market currencies, as political concerns in Europe heated up in the weeks before the first round of the French presidential elections," Emilio Neri Jr, lead economist for the Bank of the Philippine Islands, said in an email correspondence.
"Far-right candidate Marine Le Pen leads most polls although analysts are still doubtful she can pull off a win in the head-to-head 2nd round matchup in May," he added.
Neri's remarks were echoed by Guian Angelo Dumalagan, market economist at the Land Bank of the Philippines, who said: "The peso depreciated significantly today, as political uncertainties in Europe and optimism ahead of President Trump's tax plan improved the dollar's appeal as a safe-haven currency."
"Moreover, expectations of hawkish Federal Open Market Committee (FOMC) minutes later this week might have also weakened the peso," Dumalagan added.
Last February 9, US President Donald Trump said he might release the details of his fiscal reforms within the next 2 to 3 weeks. This means his fiscal plan might be released as early as this week.
On Monday, the Philippine peso had opened at P50.08:$1, touching an intra-day high of P50.23 which is where the currency pair settled at the close. (READ: How a Fed rate hike impacts the Philippine economy)
"USD/PHP marched well past the 50 handle with the psychological barrier giving way to momentum trading. With the level breached, dealers scrambled to pick up dollars with additional demand for the safe-haven dollar forcing the peso to weaken," Neri said.
"Barring other factors, we could see USD/PHP approaching P50.50 to P51 if next week's labor data in the US point to a higher probability of a March 2017, rather than a June 2017 FOMC, as the first rate increase this year. Should the figure disappoint, we may revert to P49.800 to P50 in early March," he added. – Rappler.com