The peso pierced the P55 level to the US dollar on Monday, June 27, at its intraday peak before regaining lost ground to close stronger at P54.78.
With the peso finally showing some strength versus its Friday close of P54.985, market watchers are now anticipating a higher central bank rate hike in August of as much as 50 basis points to temper both inflation and peso depreciation.Moody’s Analytics in its weekly commentary said the peso is reacting to the “moderate rate increases stand in contrast to a hawkish US Federal Reserve” and this reflected in the currency which was losing its value since June 10.
“A bloated import bill and widening current account deficit in May have also put downward pressure on the peso. Outflows of capital suggests investors lack patience with the BSP’s pace of monetary policy normalization relative to the Fed’s brisk clip,” said Moody’s. The average inflation forecasts for 2022 is five percent, 4.2 percent for 2023 and 3.3 percent for 2024. The higher inflation projections come from upside pressures from elevated fuel costs, the shortage of domestic fish supply and additional transport fare hikes due to the rising oil prices.
Since the start of 2022, the peso has depreciated by P3.78 or by 7.4 percent. The peso-US dollar rate finished at P50.999 on the last trading day of 2021.
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