Political Turmoil and Fed Hike Odds Push Philippine Peso to Record Low
The Philippine peso depreciated to an all-time low of P61.64 against the US dollar on Thursday, driven by domestic political instability and increasing expectations of US Federal Reserve rate hikes. The currency fell 26 centavos from the previous day, surpassing the prior record set in April. Key domestic factors include the impeachment of Vice President Sara Duterte-Carpio and uncertainty surrounding Senator Ronald dela Rosa, who is wanted by the International Criminal Court. These political tensions have added a significant risk premium to the peso, causing it to underperform regional peers. Additionally, hotter-than-expected US producer price inflation data reinforced hawkish sentiments regarding the Fed, particularly following the confirmation of Kevin Warsh as the next central bank chairman. Analysts note that weakening economic fundamentals, including elevated oil prices and sluggish growth, further pressure the currency. The Bangko Sentral ng Pilipinas faces a difficult trade-off between controlling inflation and supporting growth. Traders predict the peso could test levels between P61.50 and P62.00 in the near term, depending on upcoming US economic data and geopolitical developments, though the central bank retains sufficient reserves to mitigate disorderly market swings.
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