BOTH the peso and the stock market retreated yesterday, with the local currency hitting a new record low again, after the key rates of the central bank were increased by a bigger-than-expected 50 basis points.
The peso closed at P63.52 against the greenback, weaker by 15.9 centavos from the previous record low of P63.361.
It opened at P63.31 and traded between P63.3 and P63.545 to a dollar. The volume reached P1.715 billion, higher than the previous day’s volume of P1.341 billion.
A trader said the peso further weakened amid growing concerns over domestic inflation, which could further weaken the local currency.
Consumer price growth accelerated to 7.2 percent last month and the Bangko Sentral ng Pilipinas (BSP) said it could remain higher in the coming months.
“A 50-bps hike can greatly support the peso, but market forces from US fundamentals might dilute its effect,” the trader said.
Intervene, not defend
BSP Governor Eli Remolona Jr. said they are not hiking rates to defend the local currency.
“We do intervene a little bit in the foreign exchange market, but that’s mainly to avoid the swings in the exchange rate that tend to be inflationary,” Remolona said.
“We have estimates of how much the peso has to move before it becomes inflationary, and that’s when we tend to intervene,” he added.
The BSP policymaking body Monetary Board has surprised the market, raising key policy rates by 50 basis points. Benchmark rate now stands at 5.5 percent.
Chinabank Research’s Domini Velasquez said the peso’s record-low level despite the BSP’s surprise 50-basis-point rate hike highlights that higher interest rates alone may not be sufficient to support the local currency.
“While interest rate differentials with the US matter, we believe the peso’s sustained recovery will depend more on restoring confidence in the domestic economy,” Velasquez said.
“Stronger economic fundamentals, faster growth, and greater business confidence will provide more lasting support for the peso,” she added.
To date, the peso has depreciated by P4.73 or 8.04 percent from end-2025’s close of P58.79.
Ending 5-day rally
The Philippine Stock Exchange index (PSEi) retreated on Thursday as investors took profits following a five-day rally as the rate hike and the peso’s fresh record low weighed on sentiment.
The benchmark index fell 41.78 points, or 0.72 percent, to close at 5,779.73.
The decline came as investors assessed the implications of the central bank’s monetary policy decision, alongside rising global oil prices and continued weakness in the peso.
“The local market pulled back as investors took profits following a 5-day rally,” Japhet Tantiangco, research manager at Philstocks Financial Inc. said.
He added that investors also adopted a cautious stance while awaiting the BSP’s decision, which ultimately resulted in a 50-basis-point rate increase.
The peso’s depreciation to a new record low against the US dollar and rising global oil prices added to the market’s headwinds, Tantiangco said.
Luis Limlingan, head of sales at Regina Capital Development Corp., said the BSP’s rate hike reflected the central bank’s cautious stance amid persistent inflationary pressures.
“The increase heightened concerns over borrowing costs and their potential impact on economic activity, while continued peso depreciation added to market uncertainty,” Limlingan said.
Trading remained active, with net value turnover reaching P7.54 billion. Foreign investors were net buyers, recording net inflows of P1.20 billion, although their purchases were not enough to offset the broader market’s decline.
Among sectors, mining was the only gainer, rising 0.16 percent. Services posted the steepest decline, falling 0.83 percent.
AREIT Inc. led index gainers, climbing 1.79 percent, while Century Pacific Food Inc. was the biggest laggard, dropping 4.27 percent.
Across the broader market, decliners outnumbered advancers, with 108 stocks falling, 64 rising and 62 remaining at their previous day’s level.
