The peso is seen weakening further after piercing the 54 to $1 barrier to close at 54.065 Monday from Friday’s 53.75 ahead of the scheduled rate-setting meeting of the Bangko Sentral ng Pilipinas (BSP) this week.
Data from the Bankers Association of the Philippines (BAP) showed the local currency opened weaker at 53.80 and hit an intraday low of 54.105.
Analysts believe the central bank participated in the foreign exchange market as volume breached $1 billion from $962.5 million last Friday.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the closing of the peso on Monday was the weakest in about 3.5 years or since October 15, 2018 when the local currency closed at 54.08 to $1.
Ricafort said the next resistance level for the peso is at 54.325 to $1 recorded in Sept. 26, 2018.
He said the recent weakness in other ASEAN and Asian currencies after the large 75 basis points rate hike by the US Federal Reserve last June 15 continues to put pressure on the peso.
Likewise, the chief economist also cited the signals from the Bangko Sentral ng Pilipinas (BSP) that it would jack up rates by 25 basis points on Thursday as a follow up to the 25 basis points hike last May 19.
According to RCBC, the recent increase in the country’s external debt to a record $109.7 billion as of the first quarter of the year that translated to a nine-year high debt-to-gross domestic product (GDP) ratio of 27.5 percent continues to contribute to the weakness of the local currency.
Ricafort also cited the jump in COVID-19 cases to more than 600 per day.