Peso slides to fresh record low despite rate rise

The Philippine peso finished at a record-low 63.52 per US dollar despite a move by the Bangko Sentral ng Pilipinas (BSP) to raise borrowing costs before trading ended. Bankers Association of the Philippines figures put the currency’s loss at 15.9 centavos against the preceding record close of 63.361.

The central bank increased its main policy rate by 50 basis points, bringing it to 5.50 per cent. John Paolo Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the increase could make peso investments more appealing and reduce the gap between Philippine and US interest rates.

From an opening level of 63.31, the currency strengthened briefly to 63.30 before falling to a record intraday low of 63.545. About US$1.72 billion changed hands, up roughly 28 per cent from the previous session’s US$1.34 billion.

Ser Percival Peña-Reyes, director of the Ateneo Center for Economic Research and Development, cited pressure from a strong dollar, uncertainty surrounding US rates, high oil prices linked to Middle East tensions and sustained demand for dollars within the Philippines.

Peña-Reyes said the peso could test 64 per dollar within days or weeks should oil remain costly and the dollar strengthen. Reduced geopolitical tensions or a softer dollar could postpone that, he said. Rivera also identified a widening balance of payments deficit as a source of pressure.