The Philippine peso slumped to a new record low of P61.888 against the dollar on Thursday after the central bank raised its inflation forecasts for 2027 and 2028 due to risks seen from a strong El Niño drought.
Data from the Bankers Association of the Philippines (BAP) showed the peso closed at P61.888 against the dollar on Thursday, 23.8 centavos weaker than its previous finish of P61.65 on Wednesday.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corporation (RCBC) indicated that the local currency weakened ‘after higher BSP inflation estimates for 2027 and 2028 due to risk of higher inflation due to possible strong El Niño drought and wage hikes.’
Ricafort said, however, that weakness of the peso may have been offset by the latest 25-basis-point (bp) hike delivered by the Bangko Sentral ng Pilipinas (BSP) during its monetary policy meeting on Thursday, bringing the key interest rate to 5 percent.
For his part, Jonathan L. Ravelas, senior adviser at Reyes Tacandong and Co., said the peso weakened to 61.888 after the greenback strengthened anew on ‘Middle East worries.’
‘Despite the 25-bps BSP rate hike, the peso is likely to trade within the 61.60-62.00 range, with geopolitical risks continuing to drive sentiment. Stay tuned,’ he added.
China Banking Corporation (Chinabank) Group Chief Economist Domini S. Velasquez said: ‘Although we had a different view on today’s policy decision, favoring a pause over a hike, the 25-bp rate increase was largely expected and offered limited fresh support for the peso.’
Velasquez said the ‘preemptive hike’ reinforces the BSP’s focus on keeping inflation expectations anchored, ‘but comes at the cost of further weighing on domestic demand and growth.’
‘With the economy already losing momentum, this could point to a more prolonged period of weak growth ahead,’ added Velasquez.
Prior to plunging to the new all-time low of 61.888 on August 27, the last time the peso slumped to its weakest was on July 24 when it closed at P61.847 against the greenback.
Within the trading session on Thursday, the peso traded from as strong as P61.68 to as weak as P61.89 per dollar.
At the Monetary Board’s policy meeting on August 27, it revised downwards its inflation forecast for 2026 to 6.1 percent from its 6.4 percent forecast during its June 18 policy meeting.
However, it raised its inflation forecast to 5.4 percent for 2027, compared to its 4.5 percent forecast on June 18.