Philippine peso slides as U.S. rate hike bets, weak GDP weigh on currency

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Peso slides on US rates, weak GDP

Highlights

The Philippine peso weakens by 25.5 centavos to P63.31 per dollar on Monday as stronger U.S. nonfarm payroll data boosts the dollar.
Q3 Philippine GDP growth slows to 2.1%, missing the 2.7% forecast and marking the weakest result since the pandemic-induced Q1 2021 contraction.
Dollar trading volume rises to $1.26 billion from $1.196 billion, while traders expect the peso to fluctuate between P63–P63.50 per dollar ahead of U.S. inflation data.

Dollar strength and GDP miss drive peso decline

As reported by BusinessWorld Online, the peso falls by 25.5 centavos on Monday to close at P63.31 per dollar from P63.055 on Friday, based on data from the Bankers Association of the Philippines. The local currency opens at P63.06, reaches an intraday high of P63.02 and touches a low of P63.33, while dollar trading volume rises to $1.26 billion from $1.196 billion.

A trader says the peso comes under pressure after stronger-than-expected U.S. nonfarm payrolls data boost the dollar. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort says the stronger U.S. employment figures raise the odds of another Federal Reserve rate hike in December.

The U.S. dollar remains near a one-and-a-half-year high against the euro after its biggest gain in nearly six months on Friday, with Reuters reporting that robust jobs data push up expectations for higher interest rates. The dollar index, which tracks the currency against six major peers, eases 0.1% to 102.11 after jumping about 0.7% on Friday, while CME Group's FedWatch tool shows futures implying an 81% chance of a Dec. 9 rate increase, up from 71% a week earlier.

Economic slowdown adds pressure on market sentiment

Third-quarter Philippine gross domestic product growth of 2.1% also weighs on the peso, adding a domestic drag to the external pressure from the stronger dollar. Government data show growth slows from 4% a year earlier and from 2.4% in the second quarter.

The reading is below the 2.7% median forecast in a BusinessWorld poll and marks the economy's weakest performance since the 3.8% contraction in the first quarter of 2021 during the coronavirus pandemic. Excluding the pandemic years, it is the slowest GDP growth in more than 16 years, since the 1.8% expansion recorded in the fourth quarter of 2009.

For Tuesday, the trader says the peso may move between P63 and P63.50 per dollar as markets await U.S. consumer inflation data. Mr. Ricafort sees the currency trading within a P63.20 to P63.45 range.

In our earlier article on Philippine stocks rebounding despite peso woes, we covered how the PSEi clawed back losses on bargain hunting even as the peso slid to a fresh record low near the P63-per-dollar level. We also noted that foreign buying returned after several sessions of outflows, while investors stayed cautious as currency weakness continued to weigh on broader sentiment.

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