By means of Aaron Michael C. Sy, Reporter
The PESO fell again to an all-time low of P59 against the US dollar on Thursday, following the aggressive interest rate cut by the US Federal Reserve.
The local unit closed at P59 per dollar on Thursday, weakening by one centavo from Wednesday’s closing price of P58.99, data from the Bankers Association of the Philippines showed.
This was the third time this year that the peso hit an all-time low on November 26 and 21. This record, first set in October 2022, has yet to be broken.
The peso opened at P59 against the dollar, already its worst performance. The intraday best stood at P58.98 against the dollar.
Dollars exchanged fell from $884.55 million on Wednesday to $1.099 billion on Thursday.
The peso fell against the dollar as the market reacted to the Fed’s cuts and aggressive guidance for next year, Regina Capital Development Corp. sales chief Luis A. Limlingan said. in a Viber message.
Fed officials see just two rate cuts of 25 basis points (bp) next year, which would put the fed funds rate in a range of 3.75-4% at the end of 2025.
“The market is predicting a shallower trend for 2025 than previously estimated,” he added.
Markets are forecasting just one 25 basis point rate cut by the Fed next year, just a quarter of the 100 basis points of rate cuts previously seen, Reuters reported. This would bring the US central bank’s policy rate to a range of 4-4.25%.
The Federal Open Market Committee (FOMC) cut the policy rate by 25 basis points on Wednesday to the range of 4.25-4.5%.
Fed Chairman Jerome H. Powell’s signals that new inflation progress was needed for future rate cuts also caused stock prices to fall, said Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co. in a Viber message.
The dollar was broadly stronger at new two-year highs on Thursday after the Fed announced fewer interest rate cuts next year, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. in a Viber message.
He noted that the dollar was also supported by a weaker euro.
Mr. Ravelas added that it was likely that the peso could cross the P59 per dollar level within a year.
Mr. Ricafort said the Bangko Sentral ng Pilipinas (BSP) will continue to defend the peso against the dollar to keep it below or at the level of P59 per dollar.
“Going forward, the performance of the US dollar-peso exchange rate would still be partly a function of intervention/defense, as has been consistently observed for more than two years at the record high closing rate of P59, which has been respected for the time being and since then. the latter part of September 2022,” he said.
For Friday, Mr. Ricafort sees the peso moving between P58.85 and P59 per dollar.