king game Winners, losers emerge as peso weakens
There are winners and losers when the peso is weak.king game
Last Thursday, the local currency revisited the record-low 59:$1 it last touched on Oct. 17, 2022—back when an extra hawkish US Federal Reserve propped up the dollar and set off a rampage across other currencies.
But this time, the peso slump is being fueled by global uncertainties following Donald Trump’s stunning election victory, which stoked fears of a global trade war as the president-elect had warned of universal tariffs on all imported goods in the United States.
Article continues after this advertisementREAD: Peso hits record-low 59 as Trump 2.0 boosts dollar
FEATURED STORIES BUSINESS BancNet glitch affects GCash fund transfers; refunds vowed in 24-48 hours BUSINESS NDC chief resigns, plans return to private sector BUSINESS GCash says bank transfer glitch now resolvedThat same unease is also tempering expectations of bigger rate cuts by the Fed, adding power to the resurgent dollar.
The Bangko Sentral ng Pilipinas (BSP), for its part, blamed the peso’s fall on geopolitical tensions amid the escalating Russia-Ukraine war, which is driving “safe haven” demand for the greenback.
Article continues after this advertisement“The peso traded in line with the regional currencies we benchmark against,” the BSP said on Friday.
Article continues after this advertisementAs it is, the current weakness of the peso has stoked both worries and cheers at home, depending on who’s saying it.
Article continues after this advertisement ImpactA cratering peso is said to benefit Filipino migrant workers because the peso value of their remittances rises when the local currency depreciates. This, in turn, can boost the spending power of the families back home, which can add support to household expenditures in the consumption-reliant Philippine economy.
At the same time, Filipino exporters can see gains when the peso dips as it makes their products more competitive in international markets.
Article continues after this advertisementBut this situation can create problems for the government and corporations with large external borrowings, which may see the peso value of their foreign-currency denominated debts rise when the local unit is weak.
This is why fiscal planners are minimizing the state’s exposure to foreign debts—currently accounting for 31.19 percent of the P15.89-trillion debt pile of the government as of September—to avoid too many foreign exchange risks.
Zooming out, a weakening peso would push up import costs for the Philippines, something that could fan inflation. Latest estimates from the BSP show the pass-through effect of the peso’s slide on inflation is at 0.036 percentage point per 1 percent depreciation of the local currency.
BSP defenseSome analysts had flagged the risks of a rate cutting pause by the BSP should the peso remain under pressure.
BSP Governor Eli Remolona Jr. had floated the possibility of an easing delay at the Dec. 19 meeting of the Monetary Board, citing persistent price pressures.
To prevent the peso from weakening too much and fanning inflation, the BSP chief said the central bank had been intervening in the foreign exchange market recently, albeit in “small amounts.”
Subscribe to our daily newsletter
On Fridayking game, the peso appreciated by 13 centavos to close at 58.87 versus the dollar, which a trader attributed to “profit-taking ahead of the weekend.”
READ NEXT Winners, losers emerge as peso weakens PCC deepens probe into GCash, ECPay deal EDITORS' PICK Rep. Chua: Do we have to remind VP Sara Duterte to follow House rules? NBA: Magic’s Franz Wagner sinks Lakers with late trey EJ Obiena opens pole vault facility, big opportunities for youth CIDG seizes P5.7 million worth of illegal LPG equipment in Bulacan Pulong allows sis VP Sara to stay in his HOR office ‘indefinitely’ Tolentino backs stronger PNP Maritime Command amid threats in WPS MOST READ What to know about first-ever Bangsamoro Parliament elections Burial, medical aid: VP Sara Duterte says Noli de Castro did it first NDC chief resigns, plans return to private sector VP Duterte jokes with Romualdez: Return or I'll replace you as Speaker Follow @FMangosingINQ on Twitter --> View comments