The peso moved closer to entering P54:$1 territory and the stock market dropped for a fifth straight day on Tuesday, weighed down by continued emerging market concerns and worries about the domestic economy.

The currency weakened to as much as P53.97 against the US dollar during the day but trimmed the loss to six centavos for a close of P53.94:$1—the lowest since a P53.98:$1 finish on December 12, 2005.





The Philippine Stock Exchange index (PSEi), meanwhile, plunged by 1.03 percent or 78.14 points to 7,518.01 while the wider All Shares lost 0.94 percent or 43.43 points to 4.597.28.

Rajiv Biswas, IHS Markit chief economist for Asia and the Pacific, attributed the peso decline to “emerging markets contagion and expectations of more US Fed rate hikes.”

“The peso is also depreciating over concerns about the Philippines deteriorating balance of payments position (BOP) and rising inflation pressures, which has forced BSP (Bangko Sentral ng Pilipinas) policy tightening and is dampening the outlook for GDP (gross domestic product) growth,” he added.

The country’s BOP deficit widened to $3.712 billion as of end-July, significantly higher than the $1.384 billion recorded a year earlier and more than double the central bank’s full-year deficit forecast of $1.5 billion.

Above-target inflation since March, meanwhile, has prompted monetary authorities to raise key interest rates by a total of 100 basis points beginning May. August’s fresh nine-year high of 6.4 percent has raised the prospect of another rate hike when the Monetary Board meets later this month.

The Finance department acknowledged the peso decline, which it pegged at 7.39 percent since the start of the year, but added that this was in line with regional currency movements.

The peso’s drop, it added, is not the steepest with the Indian rupee and Indonesia’s rupiah having fallen the most by 11.7 percent and 9 percent, respectively. Also down for the year are the Chinese yuan (-4.97 percent), Korean won (-4.46 percent) and Taiwan dollar (-3.46 percent).

It should be noted that the rupee and rupiah, along with the Turkish lira, Brazil’s real and the Argentine peso, are among the emerging market currencies that have come under pressure recently due to fiscal worries. This has sparked fears that the contagion could spread to other economies.

The Finance department said the countries experiencing the largest currency depreciations were among the fastest-growing: India (8.2 percent in the first half), China (6.8 percent), the Philippines (6.3 percent) and Indonesia (5.1 percent).

“The Philippine peso has been moving in tandem with Asian currencies amid severe exchange rate volatility spawned by the global trade war, the Turkey-Argentina crisis and the Fed monetary normalization,” it noted.

The department said that “maintaining good macroeconomic policies, thru manageable fiscal and BOP balances, and adopting economic reforms thru tax reforms and still the best way to sustain growth and investment and, at the same time, steel the economy from external economic shocks.”

On Monday, Japan’s Nomura said a foreign exchange crisis was unlikely in the near term for the Philippines, with the country getting the best score in an “early warning system” focused on emerging market economies.

Equity markets worldwide have not been spared from investor worries and analysts said the PSEi was further pulled down by sell-offs ahead of a scheduled nationwide address by President Rodrigo Duterte.

Papa Securities Corp. trader Gabriel Jose Perez said investors had pared their portfolios and were looking for cues as to how the government would address rising inflation and other economic problems.

Duterte called off the address and instead touched on a wide range of topics in a one-on-one interview with Chief Presidential Legal Counsel Salvador Panelo.

In a separate comment, UPCC Securities Corp. trader Aristotle Reyes Jr. blamed the day’s losses to the government’s failure to detail a concrete plan to curb inflation.

“The political noise,” he added, has led to “cautious sentiments” among investors.

All sectoral indices closed in the red on Tuesday with mining and oil down the most by 2.20 percent.

More than 1.12 billion issues valued at P5.4 billion changed hands and foreign selling remained high at P577 million.

Decliners beat advancers, 150 to 58, while 42 issues were unchanged.

WITH A REPORT FROM ANGELICA BALLESTEROS