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The Philippine peso may extend its record-setting slump against the greenback as billions of dollars of trade deficits weigh on the currency, increasing pressure on the central bank to intervene to slow its descent.
The peso may slide to an all-time low of about 62 against the dollar as early as this year, about 5.4% weaker than Friday’s close, according to ING Groep NV, Bank of the Philippine Islands and eMBM Services. The currency has slumped 13% this year, and is one of the worst-performers in Asia.
Policy makers across Asia’s emerging markets are dipping in to their foreign-exchange stockpiles and ramping up verbal warnings against speculators as rate hikes by the Federal Reserve drive the dollar higher. Bangko Sentral ng Pilipinas has signaled it may need to take stronger measures to stem peso losses, including draining liquidity and boosting borrowing costs.
“The peso is feeling the heat,” said Nicholas Mapa, senior economist at ING in Manila. “Surging imports are boosting demand for dollars and leading to elevated trade deficits. The central bank is likely in the market to smooth out volatility, but you can’t really do much when the Fed comes in hot and heavy.”
The Southeast Asian nation’s monthly trade deficit exceeded $5 billion for four consecutive months through July, as imports climbed. Rising imports prompted officials to increase the forecast for the nation’s current-account gap to a record $20.6 billion this year.
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