Manila, Philippines — The Philippine peso sank to its lowest level in almost 13 years on Thursday, as rising domestic inflation and concerns about contagion from emerging markets fray investor nerves.
The local currency plunged to P53.8 against the greenback, 25 centavos weaker than its P53.55-per-dollar finish during the previous session.
This is the peso’s lowest since it closed at P53.985 versus the dollar on Dec. 7, 2005.
Year-to-date, the peso has weakened by more than 8 percent. On Thursday, a total of $911.5 million changed hands.
Sought for comment, Union Bank chief economist Ruben Carlo Asuncion said a lot of factors caused the peso’s fall.
“One is the perception in general of emerging market currencies. Two, it’s the response to the nine-year high August inflation and that the expectation that the peak is yet to come,” Asuncion said.
“Three, the [Bangko Sentral ng Pilipinas] released its regular business [expectations] survey where business sentiment is at an eight-year low,” he added.
Inflation rose to 6.4 percent in August, the highest level since the 6.6 percent posted in March 2009. In the first eight months, inflation averaged 4.8 percent, well above the central bank’s 2-4 percent target range for the year.
Meanwhile, worries that financial crises in Argentina, South Africa and Turkey will spill over into major economies fuelled a blood-letting across Asia, which filtered through to Europe.
Jonathan Ravelas, chief market strategist at BDO, warned of further pain for the peso, although the local unit is expected to take a breather in the upcoming Christmas season due to expected influx of remittance from Filipinos abroad.
“The currency’s weakness stems from a series of unfortunate events such as importers’ demand for the U.S. currency, rising inflation, and fears of contagion from emerging-market rout,” Ravelas said in a separate interview, adding that market technicals are pointing to P54.00 as the next resistance.
“With Christmas fast approaching, the much-awaited remittance could bring the appreciation closer to P53.50 or perhaps closer to our P53.00 yearend forecast,” he added.