MANILA (Mabuhay) –The Philippine peso hit a seven-year low in heavy trading Monday as importers’ dollar demand added to downward pressure stemming from stock outflows.
The peso lost 0.6 percent to 48.26 per dollar, its weakest since September 2009.
Local importers scrambled for the greenback for payments, which further weakened a currency already impacted by sustained equity outflows.
Foreign investors were net sellers in Manila stocks over the past six weeks. Analysts say President Rodrigo Duterte has been seen as alienating allies of the Philippines such as the United States with his crackdown on drugs.
The peso’s slide “picked up momentum after the break of 48,” said a senior Philippine bank currency trader in Manila who expects the currency to weaken to 48.50.
The Philippine unit may see a minor chart support at 48.35, but it is likely to seen heading to around 49.00, analysts said.
Philippine Stock Exchange index was down nearly 1 percent to 7,648.69 in noon trading Monday.
The weakness in Philippine financial markets comes on the heels of a sixth straight week of fund outflows from the Philippine Stock Exchange and 22 straight days of selling.
The discussion on why the funds are leaving has centered around two things: the Federal Reserve and its plans to raise interest rates and President Rodrigo Duterte’s colorful commentary, which S&P said has somewhat “diminished confidence” in the consistency of Philippines policies, from economic and fiscal to security and diplomacy.
Marvin Fausto, president of IFE Financial Advisors, said he also wants to see more consistency from government.
“The analysts in S&P are actually saying the inconsistencies of policies or probably some international policies that the current administration is kind of trying to clarify for an investor, those uncertainties are very clear, and those uncertainties will keep them on the sidelines,” he said.
The foreign fund outflow has helped depreciate the peso against the US dollar as offshore investors sell peso and peso denominated assets to reinvest elsewhere.
If the peso continues to weaken, it might lead to more outflows, Fausto said.
Some of the projections show the peso hitting P50 against the US dollar by next year, he added.(MNS)