Peso hits new low of P60.1 per dollar

THE PHILIPPINE PESO sank to a fresh record low on Thursday, breaching the P60-per-dollar mark and heightening inflation risks from more expensive imports.

The local currency closed at a new record low of P60.10 a dollar — 58 centavos weaker than its Wednesday finish — as markets reacted to Iran’s retaliatory attacks on Israel and US assets in the Middle East.

The peso opened the session sharply weaker at P59.90, which was its intraday best. The peso’s worst showing during the session was P60.40, a record intraday low.

Dollar turnover rose to $2.437 billion on Thursday from $1.78 billion on Wednesday.

The peso’s decline reflected the market’s knee-jerk reaction to Iran’s retaliation, Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message.

War in the Middle East threatens to push global crude prices past $100 per barrel, which could widen the Philippines’ import bill and add pressure on domestic prices. Higher energy costs may also complicate the policy outlook for the Bangko Sentral ng Pilipinas (BSP).

“The dollar-peso closed at a new all-time low as oil prices continued to climb as the intensifying US-Iran war has led to energy assets of both countries being targeted, coupled with hawkish comments from Powell overnight,” the first trader said by telephone.

Top central banks from the US, Canada and Japan struck hawkish tones on Wednesday as the Iran war drove energy prices sharply higher amid a pivotal week of global policy meetings, Reuters reported.

“The BSP likely saw these market pressures on the local currency moving in line with macroeconomic factors,” the second trader said in a Viber message, likewise noting the peso’s depreciation was mainly driven by hawkish signals from US Federal Reserve Jerome H. Powell overnight.

A weaker peso tends to push up the cost of imported goods, particularly fuel and food, potentially feeding into broader price pressures. This could limit the central bank’s room to cut interest rates and may revive expectations of policy tightening if inflation accelerates.

“The peso’s depreciation directly affects the local costs of these imports, but it will be the prolonged peso weakness that could significantly dent inflation,” the second trader said.

Finance Secretary and Monetary Board Member Frederick D. Go said on Tuesday that a prolonged surge in oil prices due to the Middle East war could prompt the Monetary Board to raise borrowing costs as early as next month.

“If the price of oil continues to persist at elevated levels, it is most likely that the Monetary Board will consider tightening in the next meeting,” Mr. Go said in an interview with Bloomberg TV.

BSP Governor Eli M. Remolona, Jr. earlier said that the central bank may have to consider monetary tightening if the surge in oil prices spill over into inflation.

The Monetary Board will hold its next rate-setting meeting on April 23.

If the Board hikes rates in April, this would be the BSP’s first rate hike in over two years or since October 2023.

The Monetary Board has been on an easing path since August 2024, slashing the benchmark policy rate by a total of 225 basis points (bps) to an over three-year low of 4.25%.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted in a Viber message that the peso could have closed weaker if not for the BSP’s intervention.

The BSP said in a statement on Thursday it continues to intervene in the foreign exchange market to prevent inflationary swings.

“On the peso, the BSP stresses that it operates in the foreign exchange market to smooth excess volatility and maintain orderly conditions. This is consistent with a flexible exchange rate policy, with intervention limited to tempering large swings that could affect inflation rather than defending any specific level,” the central bank said. 

Moving forward, Mr. Ravelas said the peso could remain above the P60-per-dollar level if the Middle East war escalates.

Trading will be closed on Friday due to the Eid’l Fitr (Feast of Ramadan) holiday. — Aaron Michael C. Sy