The Philippine peso dove to a new record low on Thursday, breaching the P63 threshold per US dollar for the first time in history. The peso-dollar exchange rate closed at P63.15 per US dollar.
The previous record was P62.925 per US dollar, set exactly a month ago on September 15.
The Bangko Sentral ng Pilipinas (BSP), the country’s central bank, cited a stronger US dollar, shifting expectations around US Federal Reserve rate cuts, and regional market pressures brought about by the prolonged war in the Middle East as reasons for the decline.
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The Philippine currency had lost P5.21 against the US dollar since the US-Israeli-led war against Iran started on February 28.
The new record low came as the BSP took a conservative approach to defending the peso against the volatile foreign exchange market, choosing to preserve its reserves and intervene only when movements become sharp and disorderly.
The BSP primarily uses the country’s Gross International Reserves to stabilise the Philippine peso against foreign exchange volatility and service foreign debt obligations.
The Philippine Statistics Authority (PSA), meanwhile, said electronic products and petroleum products, such as crude oil and refined fuel, are two of the country’s top imports, accounting for significant foreign exchange outflows and import expenditure.
Much of the country’s foreign exchange comes from remittances from its millions of workers abroad, including 2.4 million overseas workers in the Middle East. There are about a million Filipinos in the UAE, contributing approximately P380 billion or $6.06 billion (Dh22.15 billion) every year.
Local economic think tank Ibon Foundation argues that a record-low Philippine peso, coupled with high global oil and import prices, creates a “double whammy” that aggressively drives up domestic inflation and worsens economic strain for Filipino households.
The PSA recently reported that the inflation rate in the Philippines stood at a whopping 7.2 per cent last September, a sharp increase from 6.1 per cent in August.
Philippine oil industry sources have already announced a gasoline price increase of up to P4.30 per litre next week.
