The peso hit another 13-year low on Tuesday when it shed 8 centavos more at the close of trades at the market operated by the Bankers Association of the Philippines.
The local unit ended the day’s trades at P54.31 per dollar from P54.23 per dollar on Monday.
This was the lowest the peso has plunged since it exchanged for P54.425 per dollar on 22 November 2005.
According to the BAP, the local unit hit an intraday low of P54.35, 7 centavos weaker than Monday’s low of P54.28 per dollar.
Total trading volume also proved lower at only $668.35 million on Tuesday from Monday’s $670.6 million.
According to Carlo Asuncion, chief economist at the Union Bank of the Philippines, the weakened currency may be traced to “noises” such as the US-China trade deadlock, perceived higher global oil prices and inflationary figures exceeding expectations.
Likewise, Shashank Mendiratta from ANZ Bank shared the same sentiment, saying the local currency is reacting to the “expectation that inflation will rise further in September.”
“The losses to paddy (palay) production due to typhoon are estimated at about P14.5 billion [picking up rice prices] and will add to inflation in September which is expected to move closer to seven percent,” he added.
Another economist, Guian Angelo Dumalagan from the Land Bank of the Philippines also attributed the depreciation to “safe-haven buying amid escalating US-China trade tension.”
“There’s also widespread expectations of another rate hike from the US Fed on 27 September,” Dumalagan said.
This further weakening of the local unit increases the likelihood of another rate hike this month, according to the LandBank official.
“Tomorrow, the exchange rate may move within the P54.20 to P54.0 range,” he added.
According to Jonas Ravelas, the US dollar rebounded from session lows as trade tensions remained elevated and political risks resurfaced, with conflicting reports about whether US Deputy Attorney General Rod Rosenstein will resign, for instance.
He noted the euro rose to its highest in more than three months after European Central Bank president Mario Graghi said he sees a relatively vigorous pickup in underlying inflation.
In the Philippines, Ravelas said the local unit at P54.23 per dollar highlights the controlling role played by so-called dollar bulls.
He projects near-term resistance at P54.50 per dollar and for the unit to range from P54 to P54.25 at the currencies market.