Philippines: Peso weakens to over seven-year low
November 14, 2016
In November, the Philippine peso (PHP) weakened against the U.S. dollar, continuing a trend that began in early August. On 11 November, the currency traded at 48.96 PHP per USD, the weakest value since 29 April 2009. This was 0.4% weaker than on the same day of the previous month and 4.0% weaker on an annual basis. The currency has lost 4.3% of its value since the beginning of the year.
The recent depreciation of the peso has been driven by several factors. On the one hand, it reflects that the U.S. dollar is strengthening on the back of rising expectations of a Fed rate hike sometime soon. On the other hand, the current account surplus in the Philippines has been narrowing, as remittances growth slowed in the second half of this year compared to the strong growth rates observed in past years. In addition, foreign selling of Philippine stocks increased on the back of market concerns over policy uncertainty surrounding Rodrigo Duterte’s administration. Lastly, on 11 November Southeast Asia’s markets were hit as a side-effect of Donald Trump’s victory in the US presidential election, due to growing consensus that his fiscal stimulus and massive infrastructural investment programs will push up inflation and U.S. rates, pushing capital out of emerging markets into dollar-based assets.