THE peso fell to a seven-year low of 48.25 against the US dollar on Monday as a result of the impending increase in interest rates in the United States, Budget Secretary Benjamin Diokno said Tuesday.
He said President Rodrigo Duterte’s statements had nothing to do with the local unit’s decline as claimed by market analysts.
“The depreciation of the peso is no cause for concern. We’ve seen the peso going to P55 in the past,” Diokno said.
“The depreciation of the peso is a result of the strengthening of the dollar more than the weakening of the peso. It has nothing to do with the President’s statements.”
Rep. Karlo Alexei Nograles, a Duterte ally, said global market forces were to blame for the decline in local stocks and not Duterte’s verbal attacks on western leaders.
“Portfolio investments should not be used to gauge the economy because there are many factors that affect the stock market that are not necessarily reflective of a country’s economic position,” Nograles said.
But opposition lawmakers Edcel Lagman, Edgar Erice and Tom Villarin on Tuesday blamed President Duterte’s foul mouth for the falling stock prices.
“The reckless utterances of the President may be destroying the Philippine economy,” Lagman said.
“It’s not only the slide in the peso”•the worst in seven years”•but the pullout of investors from the stock market.”
Lagman also blamed Duterte’s temper.
“We are dimming the opportunity of the Philippines to have a new credit rating that would give us more access to foreign loans,” he said.
Diokno said the peso’s downward movements were partly reflecting the uncertainty about the Federal Reserve’s next policy action, which could be an increase in US interest rates that would pull the dollar higher.
“The guessing is that before the end of the year the Fed will eventually increase interest rates. That will make it more attractive for hot money to go back to the US,” Diokno said.
The peso lost P0.26, or 0.5 percent, to close at 48.25 to a dollar on Monday from 47.99 to a dollar on Friday.
That was the peso’s weakest level since it settled at 48.356 on Sept. 16, 2009, at the height of the global financial crisis.
The total volume turnover reached $758.5 million against $590.5 million on Friday.
Diokno also rejected speculation that a weaker peso would result in higher inflation, which eased to 1.8 percent in August.
“The official inflation target is 2 to 4 percent. We are much lower than two,” he said.
