Reaction to Fed rate freeze drives PH currency to 6-month low
The peso slid to its weakest closing level in nearly six months on Thursday, settling at P58.32 against the US dollar as traders reacted to the US Federal Reserve’s decision to freeze interest rates.
It was the local currency’s lowest close since hitting P58.34 on February 4, and marked a P0.74 drop from Wednesday’s P57.58 finish.
The peso touched an intraday low of P58.40, after opening at P57.86 and peaking at P57.85, data from the Bankers Association of the Philippines (BAP) showed.
The day’s average weighted rate stood at P58.186, compared with P57.306 the previous day.
Market reacts
The day’s depreciation followed the advance release of the US second-quarter GDP, which showed a stronger-than-expected 3 percent expansion.
The upbeat numbers have renewed expectations of prolonged higher US interest rates, making the dollar more attractive to investors.
The peso’s weakness also coincided with a broader slump in local equities. The benchmark PSEi dropped for the sixth straight session, losing 65.50 points to close at 6,252.73 — its lowest since June 18.
An analyst pointed out the markets were also digesting recent trade movements.
Chief economist Michael Ricafort of Rizal Commercial Banking Corp. said the peso has weakened for five straight days, partly due to external pressures and investor caution ahead of key data releases.
Ricafort cited the Philippine trade delegation’s recent agreement with Washington to lower a US tariff rate from 20 percent in exchange for zero tariffs on select US imports, including motor vehicles.
While seen as a slight positive, this was “already partly priced in,” thus offering a limited boost, he said.
Volatility ahead
Ricafort warned that the peso may dip further to P58.50 or even P59, though immediate support may hold at P57.50 to P58.
A minor technical support range is seen at P57.15 to P57.65, while stronger stability is likely between P56.40 to P56.75.
“These levels should help preserve the peso’s underlying upward trend seen over the past two months and may prevent a re-test of the P55.143 low posted last May 26,” he said.
BSP addresses concern
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. addressed concerns earlier this week, saying he is unfazed by the peso at P57, but described the P58 level as speculative.
“I don’t speculate,” he said.
Remolona dismissed inflationary concerns tied to the weaker peso, noting that inflation has averaged just 1.8 percent over the past six months, well below the BSP’s 2–4 percent target range for 2025.
While the BSP maintains a market-determined, free-floating exchange rate, it reserves the right to intervene during periods of excessive volatility.
“We step in when we see stress in the spot market,” the governor said, “especially when there’s only one side buying or selling.”
He reiterated that the central bank holds sufficient US dollar liquidity to safeguard the peso from speculative attacks.
Critical data ahead
Market participants are now eyeing two critical domestic data releases next week: July inflation figures on August 5 and second-quarter GDP on August 7 — both likely to shape the next moves for monetary policy and the peso.
