Peso tumbles to new all-time low on near-term inflation risks

THE PESO closed at a new all-time low against the dollar on Thursday as prospects of elevated inflation in the near term weighed on market sentiment. The local unit closed at P61.888 a dollar, losing 23.8 centavos from its P61.65 finish on Wednesday, data on the Bankers Association of the Philippines’ website showed.

THE PESO closed at a new all-time low against the dollar on Thursday as prospects of elevated inflation in the near term weighed on market sentiment.

The local unit closed at P61.888 a dollar, losing 23.8 centavos from its P61.65 finish on Wednesday, data on the Bankers Association of the Philippines’ website showed. This was the currency’s weakest close versus the greenback, breaking its previous record finish of P61.847 on July 24. Year to date, the peso is now down by 5.01% or P3.098 fromThe peso also opened Thursday’s session weaker at P61.71 against the dollar.

Its strongest showing stood at P61.68, while its intraday low was P61.89 against the greenback.

“The peso depreciated to record lows after the BSP upwardly revised its inflation outlook for 2027 on account of risks from the anticipated El Niño phenomenon and the impact of wage hikes,” a trader said in a Viber message. At its Aug. 27 meeting, the central bank delivered its third straight rate hike as volatile global oil prices, the looming “Super El Niño,” and potential minimum wage increases dimmed its inflation outlook.

The Monetary Board lifted its benchmark rate by 25 basis points to an over one-year high of 5%, with BSP Governor Eli M. Remolona, Jr. signaling more hikes as needed to steer inflation close to their target. The BSP trimmed its 2026 inflation forecast to 6.1% from 6.4% amid softer-than-expected prints in recent months. In the seven months to July, inflation averaged 5%.

However, the central bank now sees the headline print hitting 5.4% next year and 3.3% in 2028 as the impact of severe El Niño conditions and expectations of wage hikes are expected to push up consumer prices. These are up from 4.5% and 3.1%, respectively.

Still, the BSP’s move to tighten its stance and its signals that it is ready to raise rates further to help tame elevated inflation can provide support for the peso, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message. For Friday, the trader said the peso may stay weak and possibly test the P62 line as the market awaits US Federal Reserve Chair Kevin Warsh’s remarks at the Jackson Hole symposium.

The trader sees the currency moving between P61.75 and P62, while Mr. Ricafort expects it to range from P61.75 and P61.995. —

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