Philippine peso slides to record-low P60 vs US dollar

MANILA, Philippines – The Philippine peso weakened to a record-low of P60.10 against the US dollar on Thursday, March 19, as global oil prices surged amid the ongoing conflict in the Middle East.

Data from the Bankers Association of the Philippines showed that the peso closed at P60.10 against the greenback, shedding 58 centavos from the previous day’s close of P59.52. The currency slid as far as P60.40 on Thursday trade.

The further weakening of the peso comes as crude oil prices breached the $100-per-barrel mark as the conflict in the Middle East threatens supply chains through the Strait of Hormuz. The Philippines imports around 98% of its crude from the region, and the conflict has led to record-high pump prices across the country.

Michael Wan, senior analyst at MUFG Bank, earlier estimated that the peso could even drop to P61 against the dollar if the US continues its military campaign against Iran.

The weaker peso further complicates the Philippines’ struggle to keep up with oil prices since the exchange rate makes it more expensive to purchase oil.

Rappler’s resident economist JC Punongbayan, however, downplayed the news saying, “There’s nothing really special about P59.9 versus P60.1, if you think of it. This is a breach of a psychological barrier, if anything.”

“We are under a floating exchange rate regime. That means that we let supply and demand determine the peso-dollar exchange rate,” he added.

Punongbayan said the impact of the weaker peso has its pros and cons.

“A weak peso is bad news for importers, because imported goods become more expensive. This is especially bad now that oil prices globally are spiking. But at the same time, a weak peso is good news for our exporters, because our goods and services become cheaper in the eyes of foreigners,” said the UP College of Economics assistant professor.

Punongbayan also warns that a weaker peso could spike inflation since it makes imports more expensive.

While the Bangko Sentral ng Pilipinas has been intervening in the foreign exchange market to temper market volatility, Punongbayan also said that the monetary authority can only do so much.

“They can’t deplete our reserves just to prevent a breach,” he said. – Rappler.com