The Philippine peso ended Friday’s trading session at 56.315:$1, its weakest level in nearly nine months. This could potentially signal a depreciation of the local currency as the US dollar continues to hold steady while other countries face worse economic indicators than the United States.
At this rate, the peso-dollar exchange rate is approaching the upper end of the Marcos administration economic team’s forecast for 2023, which was set at 54-57 pesos against the greenback.
The peso lost 9.5 centavos against the US dollar, falling from the 56.22:$1 closing rate on August 10 and reaching its weakest position since 56.50:$1 on November 29 of last year.
In addition, the local currency has lost a total of P1.545 against the dollar since the beginning of this month at 54.77:$1.
According to ING Bank, the US dollar remains relatively strong despite lackluster economic data because the foreign exchange markets have not found a better alternative to the greenback.
“This does not mean that the economic outlook in the US is particularly bright, but if economic slowdown warnings are flashing yellow in Washington, they are flashing amber in Frankfurt and Beijing,” said ING Bank.
Meanwhile, Sumitomo Mitsui Banking Corp. predicts that the Bangko Sentral ng Pilipinas (BSP) will likely cut its policy rate within this year due to the slower-than-expected growth of Philippine output in the second quarter.
SMBC believes that the BSP might lower its benchmark rate earlier than the United States Federal Reserve, which remains hawkish. If this happens, the interest rate differential between the United States and the Philippines will narrow.
“Based on this outlook, the possibility of the peso depreciating against the dollar cannot be ruled out,” the Japanese banking group stated.