Peso seen to weaken further

MANILA, Philippines — The peso is seen to weaken further on expectations of another US Federal Reserve rate hike, higher demand for oil, as well as knock-on effects on domestic inflation following the newly approved fare hikes, according to an economist.

“I think it (peso) is going to fall further,” economist Calixto Chikiamco said in an interview with The Chiefs aired over One News.

The peso fell to a new all-time low as it closed at P57.43 to $1 dollar on Friday, losing 27 centavos from Thursday’s finish of 57.16.

Chikiamco said among the major factors driving the fall of the peso is the increase in the US core inflation rate, which is expected to lead to more tightening from the US Fed.

“The Fed most probably would have to impose a higher than expected interest rate. They have to go hard to contain the surprising surge in core inflation,” he said.

He said another factor is the expected increase in demand for oil moving into winter, which could lead to a rebound in prices.

In addition, the economist said Philippine inflation is a factor affecting the peso.

“The fare increases have just been approved. This will have knock-on effects in terms of increased wages, increased prices etc. And the other worrying issue is really the possible food crisis by the last quarter,” he said, adding there are indications there will be shortages of chicken, pork, and fish, and even rice could be affected.

The Land Transportation Franchising and Regulatory Board (LTFRB) has approved fare hikes for public transportation, which are set to take effect on Oct. 4.

For traditional and modern jeepneys, the base fares have been increased to P12 and P14, respectively, from the current P11 and P13.

As for ordinary and air-conditioned city buses, the approved fares are at P13 and P15, respectively, from the current P11 and P13.

When it comes to taxis and transport network vehicle services, the LTFRB approved a P5 increase in the flag down rate.

Chikiamco said the impact of the fare hikes on inflation would be significant if the government responds by increasing minimum wages.

The country’s headline inflation eased slightly to 6.3 percent in August from the 6.4 percent in July, as increases in transport and food prices slowed.

Inflation averaged 4.9 percent in the January to August period.

Despite the weakening of the local currency, Chikiamco said he does not see this as a cause for concern for now.

“For one thing, we are not the only currency that’s falling relative to the US dollar. Other major currencies, the euro, the pound, the Japanese yen is even falling further. So, I think imports from those countries will not really go up. I mean, in terms of the prices,” he added.

“What worries me more are really the coming food shortages,” he said.