THE PESO further weakened versus the dollar on Tuesday following fears of a global recession as US Federal Reserve officials remained hawkish after delivering a large rate increase last week.

The local unit closed at another record-low of P58.99 against the greenback on Tuesday, losing 49 centavos from its P58.50 finish on Friday, Bankers Association of the Philippines data showed.

Year to date, the peso has weakened by 15.66% or P7.99 from its P51-per-dollar close on Dec. 31, 2021.

Markets were closed on Monday due to Super Typhoon Karding, which entered the country on Sunday, prompting President Ferdinand R. Marcos, Jr. to suspend work and school.

The local unit opened Tuesday’s trading session at P58.80 versus the dollar. Its weakest showing was at its close of P58.99, while its intraday best was at P58.70 against the greenback.

Dollars exchanged went up to $1.06 billion on Tuesday from $985 million on Friday.

“The peso closed near the 59-peso level amid concerns of a global recession from the strong hawkish policy action by the US Federal Reserve,” a trader said in an e-mail.

According to MUFG Bank Global Markets Research Senior Currency Analyst Jeff Ng, market players are pricing in more rate hikes by the US Fed this year without rate cuts in 2023.

On Monday, Boston Fed President Susan M. Collins and Cleveland President Loretta J. Mester said additional tightening is needed to tame inflation, even though it may cause some job losses.

Atlanta Fed President Raphael W. Bostic also said the US central bank still has some way to go to be able to curb inflation.

The Federal Open Market Committee has hiked its federal fund rate by 300 basis points (bps) since March to a target of 3-3.25%.

The peso also weakened after the local stock market declined for the fourth straight day, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The benchmark Philippine Stock Exchange index (PSEi) lost 239.47 points or 3.82% to close at 6,020.07 on Tuesday, while the broader all shares index dropped by 107.06 points or 3.2% to 3,234.23.

This is the PSEi’s lowest close in two years or since the 6,019.26 on Oct. 19, 2020.

“Sentiment on the peso and local financial markets also weighed by Super Typhoon Karding damage especially on agriculture,” Mr. Ricafort said, adding that this could lead to a pickup in food prices and overall inflation.

Agricultural damage by typhoon Noru has climbed to P160.1 million, according to the Department of Agriculture.

Damage and losses were reported in Cordillera Administrative Region, Ilocos Region, Central Luzon, Calabarzon, affecting 3,780 farmers and fisherfolk, with the volume of production loss at 7,457 metric tons and 16,659 hectares of agricultural areas.

Mr. Ricafort also said market players priced in the International Monetary Fund’s (IMF) revised gross domestic product (GDP) forecast for the Philippines this year.

The IMF on Monday lowered its growth forecast for this year to 6.5% from its 6.7% estimate in July, matching the lower end of the government’s 6.5-7.5% goal, as rising interest rates cloud the global economic outlook.

In its latest World Economic Outlook, the IMF slashed the global GDP growth outlook to 3.2% from 3.6% this year and to 2.9% from 3.6% for 2023.

“The recent sell-off in the global stock and bond markets also due to more aggressive Fed/other central bank rate hikes and risks of US recession also supported the US currency as a settlement currency for global investors as well as a safe haven amid increase global market risk aversion,” Mr. Ricafort said.

For Wednesday, the trader said the peso may appreciate from profit taking and likely weaker US durable goods report that was scheduled to be released overnight.

The trader and Mr. Ricafort expect the local unit to move within P58.80 to P59 against the dollar. — Keisha B. Ta-asan