MANILA, Philippines — The pesos closed at P50 to a dollar on Friday, dipping to its lowest level in a decade due to strong corporate demand for the greenback and market uncertainties about the interest hike of the Federal Reserve and tax plan of the administration of US President Donald Trump.
The local currency plunged by 3 centavos to P50:$1 from Thursday’s P49.970.
According to Diwa Guinigundo, a deputy governor of the Banko Sentral ng Pilipinas, the decline is due to external market uncertainty and high corporate demand for the dollar.
“It’s still the same story of external market uncertainty. And despite market uncertainty about a March US Fed interest rate hike, there was higher demand from corporates today,” Guinigundo said in a text message.
He said that despite strong Philippine market fundamentals, negative market sentiment still dominates.
Today’s P50:$1 is the lowest since the P50.09:$1 seen on Nov. 15, 2006.
Guinigundo said that the central bank expected “the market to react to the news that overseas Filipino workers’ remittances remain resilient and growth prospects remain very positive at the back of strong consumption, investment and public expenditures.”
He said that in real terms the peso was still competitive. “We continue to monitor pressure from weak exchange rate even as the exchange rate pass through to domestic inflation has gone down in recent years,” he added.
The peso reached an intraday low of P50:$1 at the Philippine Dealing System and a high of P49.94:$1.
Federal Reserve Chair Janet Yellen signaled this week a faster tightening pace, with the markets expecting three hikes this year instead of two.
Higher interest rates in the US means that money could channel out of emerging markets such as the Philippines, driving demand for the dollar.
Trump also promised early this month to unveil a major tax cut to ease the burden on businesses. The peso weakened due to the expectations of an announcement next week.