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The peso breached P44 against a US dollar as inflation hit its
nine-year high level for May.
At the Philippine Dealing System, peso
depreciated further to eight-month low of P44.07 on Thursday from
P44.945 in Wednesday. The peso posted its last P44 level in October
last year at P44.0450.
Peso traded to a high of P41.100 and a low of
P41.00.
Total volume turnover reached $404 million.
The peso is affected by higher oil and commodity
prices as reflected in the nine-year high inflation of 9.6 percent
in May.
Marcel Ayes, Rizal Commercial Banking Corp.
assistant vice president, said the record-high inflation rate
“will put pressure on peso” and “may not be addressed by
raising rates” as it is supply-driven.
The Bangko Sentral ng Pilipinas (BSP) said its
25-basis point increase in interest rates will help restrain
inflation and strengthen the peso this year.
“A strong peso will manage inflation
effectively. The [BSP’s rate] adjustment will strengthen the
peso,” Diwa Guinigundo, BSP deputy governor, said.
Ayes said peso is expected to weaken to P44.50
to P44.60 this week, while the Development Budget Coordination
Committee has projected the Philippine currency to average between
P42 and P45 against the US dollar this year.
Meanwhile, Hong Kong and Shanghai Banking Corp.
(HSBC) said inflation is likely to touch double-digit territory in
the next few months before it drops back on account of easing global
commodity prices and slowing economic activity.
HSBC forecasted inflation to average 7.7 percent
this year from 2.3 percent last year.
Frederick Neumann, HSBC economist, said BSP’s
policy rates may hit 6 percent this year if inflation stays in
double-digit territory for more than three months.
In a separate report, Union Bank of Switzerland
revises upwards its inflation projection to 8 percent this year from
7.2 percent.
However, inflation is expected to fall to 4.8
percent next year from the original projections of 4.4 percent.
-- Maricel E. Burgonio
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