MANILA, Philippines - The peso lost 23 centavos to hit its lowest level in 10 months, breaching the 44 to $1 level as rising fears of mass downgrades by credit rating agencies for European Union economies led to more risk aversion among portfolio fund owners.
The local currency weakened to 44.11 to $1 from Tuesday’s 43.88 to $1. This was the weakest level of the peso since closing at 44.21 to $1 last Feb. 1.
At the Philippine Dealing & Exchange Corp. the peso opened at 43.99 to $1 and hit an intra-day low of 44.16 to $1.
Yesterday’s trading volume was heavy at $1.26 billion from Tuesday’s volume of $1.015 billion.
Traders said the dollar continued to gain ground against the peso despite rising remittances from overseas Filipinos.
The Bangko Sentral ng Pilipinas (BSP) has retained the growth forecast for OFW remittances at seven percent this year and five percent next year.
Furthermore, monetary authorities vowed to support economic growth next year with a monetary policy stance that would be responsive to global economic developments amid a stable inflation environment.
“The BSP’s monetary settings will be responsive to these developments. We will endeavor to support economic growth while maintaining a non-inflationary operating environment,” BSP Governor Amando M. Tetangco Jr. said.
The US Federal Reserve warned the other day that the debt crisis in Europe would continue to present a big risk to the US economy.
“The Fed’s assessment of moderate expansion in US economy and of some improvement in US labor conditions is a welcome development to its trading partners, including the Philippines,” he said.
The BSP chief earlier hinted that there is room for monetary authorities to ease the country’s policy stance early next year in light of the manageable inflation outlook as well as weaker than expected economic growth of the country.
“The Fed has also echoed the sentiment of other policy makers, including the BSP, that how the global recovery would pan out depends largely on the speed and order of the resolution of the EU debt crisis. The Fed’s assessment supports our own cautious policy stance,” Tetangco said.
Last December 1, the BSP kept interest rates steady for the fifth consecutive policy-rate setting meeting due to benign inflation outlook.
As a preemptive move to keep inflation expectations well anchored, the BSP raised interest rates by 25 basis points last March 24 and by another 25 basis points last May 5 due to the continued build up in inflation pressures brought about by escalating prices of oil and food in the world market.
This brought the overnight borrowing rate is currently pegged at 4.50 percent while the overnight lending rate is at 6.50 percent. - By Lawrence Agcaoili
