Omega Management logo

More global forex turmoil ahead — peso not immune

As if the world economy would need another crisis trigger, global foreign exchange markets are in historical turmoil. Over time, it can’t be contained without a more diversified global reserve currency system.

BY early October, the Philippine peso had tanked 13 percent against the US dollar. It is now trading just below 59, holding near a record low in late September. And it is set for further depreciation.

Accelerated capital outflows have added downward pressure on the peso, with equity outflows reaching $1.2 billion so far this year. As billions of US dollars of trade deficits weigh on the currency, the government has few alternatives but to respond to the Fed’s aggressive hikes.

Although the Bangko Sentral ng Pilipinas (BSP) has lifted rates by a total of 225 basis points this year, it is compelled to continue tightening to avoid further peso depreciation. Despite…

Read more…