MANILA, Philippines — The Philippine peso ended a hair’s breadth from the 55 peso-per-dollar level on Friday, posting its weakest performance in nearly 17 years after the Bangko Sentral ng Pilipina ignored calls for bigger rate hikes to fight inflation.
The local currency ended the week at P54.985 against the greenback, weaker than its previous close of P54.7.
The data showed that this is the peso’s worst performance since it closed at 55.08 pesos against the dollar on October 28, 2005 – the year in which the political scandal and electoral crisis known as “Hello, Garci” died Philippines under the Arroyo administration.
The fall came a day after the BSP hiked interest rates by another 25 basis points, defying calls for a more aggressive crackdown on inflation amid an ultra-hawkish Federal Reserve.
“The recent weakness is likely driven by market sentiment that BSP is behind the curve on rate hikes, especially as calls were made yesterday to be more aggressive,” Domini Velasquez, chief economist at China Banking Corp., said in a Viber message.
A weak currency could make imports for the Philippines more expensive. This in turn could fuel inflation further.
While other emerging-market currencies have also been in free fall amid a strengthening dollar, Jun Neri, chief economist at the Bank of the Philippine Islands, believes the peso’s plunge should not be taken lightly.
“The peso’s year-on-year decline is no more than 11% and is the third largest decline among major Asian currencies, so I don’t think we can downplay the decline as something common to all. Only the Japanese yen and the Korean won weakened against the peso. Almost everyone else is strengthening against the peso year-over-year,” Neri said in a Viber message. – with Ramon Royandoyan