PHP slips to record-low 59 per USD on hawkish Fed cut

The peso sank to the all-time low of PHP 59 against the US dollar anew on Thursday, following the US Federal Reserve’s hawkish cut.

The local unit closed at PHP 59 per dollar on Thursday, weakening by one centavo from its PHP 58.99 finish on Wednesday, Bankers Association of the Philippines data showed.

This was the third time the peso hit its historic low this year on Nov. 26 and Nov. 21. It has yet to breach this record, which was first set in October 2022.

The peso opened at PHP 59 against the dollar, which was already its worst showing. Its intraday best was at PHP 58.98 versus the greenback.

Dollars exchanged dropped to USD 1.099 billion on Thursday from USD 884.55 million on Wednesday.

The peso slipped against the dollar as the market reacted to the Fed’s cut and hawkish guidance for next year, Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

Fed officials see only two 25-basis-point (bp) rate cuts for next year, which would bring the Fed funds rate to the 3.75-4% range by end-2025.

“The market is forecasting a shallower trend for 2025 vs previously estimated,” he added.

Markets have forecasted only one 25-bp rate cut by the Fed next year, only a quarter of the 100 bps in cuts previously seen, Reuters reported. This would bring the US central bank’s policy rate to the 4-4.25% range.

The Federal Open Market Committee (FOMC) on Wednesday lowered its policy rate by 25 bps to the 4.25-4.5% range.

Fed Chair Jerome H. Powell’s signals of requiring fresh inflation progress for future rate cuts also caused equity prices to fall, Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message.

The dollar was generally stronger at new two-year highs on Thursday after the Fed signaled fewer rate cuts next year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

He noted that the dollar was also supported by a weaker euro.

Mr. Ravelas added it was likely that the peso could breach the PHP 59-per-dollar level within the year.

Mr. Ricafort said the Bangko Sentral ng Pilipinas (BSP) will continue to defend the peso against the dollar to keep it at below or at the PHP 59-per-dollar level.

“Going forward, the performance of the US dollar-peso exchange rate would still be partly a function of intervention/defense as consistently seen for more than two years already at the record high closing rate of PHP 59, which has been respected for now and since the latter part of September 2022,” he said.

For Friday, Mr. Ricafort sees the peso moving between PHP 58.85 and PHP 59 per dollar. – Aaron Michael C. Sy, Reporter