Peso slides to over two-year low

The peso sank to an over two-year low on Wednesday amid escalation in the Russia-Ukraine war as well as further signals on US President-elect Donald J. Trump’s economic policies.

The local unit closed at PHP 58.91 per dollar on Wednesday, weakening by 10 centavos from its PHP 58.81 finish on Tuesday, Bankers Association of the Philippines data showed.

This was the peso’s weakest close in 25 months or since its PHP 58.94 close on Oct. 20, 2022.

The peso opened the session at PHP 58.80 against the dollar with its intraday best at PHP 58.77. Meanwhile, it dropped to as low as PHP 58.925 versus the greenback.

Dollars exchanged went down to USD 1.096 billion on Wednesday from USD 1.473 billion on Tuesday.

The first trader said in a phone call that the peso slipped amid an escalation in the Russia-Ukraine war.

“The US dollar-peso exchange rate is also higher amid some geopolitical risks related to the Russia-Ukraine war lately,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Reuters reported that Russian President Vladimir Putin on Tuesday lowered the threshold for a nuclear strike in response to a broader range of conventional attacks, days after reports said Washington had allowed Ukraine to use US-made weapons to strike deep into Russia.

Ukraine used United States-made Army Tactical Missile System (ATACMS) missiles to strike Russian territory on Tuesday. However, Moscow said the use of ATACMS, the longest-range missiles Washington has supplied to Ukraine so far, was a clear signal the West wanted to escalate the conflict.

The second trader in an e-mail said that the peso depreciated after reports that Mr. Trump has narrowed his choice for Treasury secretary.

Bloomberg News reported Mr. Trump was set to interview former Federal Reserve Governor Kevin Warsh and Apollo Global Management Chief Executive Officer Marc Rowan for the post of Treasury secretary.

“However, (Mr. Warsh’s) previous experience in the Fed might give him an edge over other candidates for the position… his pick is widely viewed as supportive of his alternative approach to the US central bank, falling in line with the US economic plans by Trump,” the trader said.

Mr. Ricafort also noted the latest balance of payments (BoP) data, which posted a deficit position.

The country posted a BoP deficit of $724 million in October, a reversal of the USD 1.51-billion surplus a year ago and USD 3.526-billion surfeit in September, latest central bank data showed.

The second trader said the peso may stay close to the PHP 59-per-dollar level in the near term.

“The peso is likely to remain elevated near the PHP 59 level as growing geopolitical concerns and uncertainties on Trump policies continue to drive demand for the greenback,” the second trader said.

In October 2022, the peso hit a record low of PHP 59 against the dollar, which led to inflationary pressures and prompted the central bank to intervene.

BSP Governor Eli M. Remolona, Jr. has said that the peso’s recent weakness is not a cause for concern as it was expected that the dollar strengthened after Mr. Trump was elected US President.

However, he said that the central bank has had to intervene in “small amounts.”

For Thursday, the first trader expects the peso to move between PHP 58.60 and PHP 58.95 while the second trader sees the peso trading from PHP 58.75 to PHP 59.

Meanwhile, Mr. Ricafort expects it to range from PHP 58.75 to PHP 58.95. — L.M.J.C.Jocson