MANILA, Philippines — The peso extended its losing streak for the third day in a row yesterday, shedding another 15 centavos to close at 52.70 from Thursday’s close of 52.55 to $1, a day after the Bangko Sentral ng Pilipinas (BSP) reduced the level of deposits banks are required to keep with the central bank.

Yesterday’s close was the weakest in 12 years or since the peso closed at 52.745 to $1 on July 19, 2006.

UnionBank treasurer and chief finance officer Jose Emmanuel Hilado attributed the weakness of the peso to the possibility of another interest rate increase by the US Federal Reserve.

“If you look at it, it is because of the outlook in the US. There will be two or three more rate hikes. Normally, money goes to the currency that has a higher yield, so that is what is driving all of these things,” Hilado said.

The US Fed raised interest rates by 25 basis points in March and may impose more interest rate hikes to match the three rate increases last year.

Hilado said the movement of the peso was mainly due to external factors and not the strong economic fundamentals of the Philippines.

“But there is still exchange parity on the other currencies, meaning the rate of depreciation of the peso is more in line with the rest. So from a peso to other currency standpoint you maintain your parity, unlike before the peso was weaker in the rate of exchange with other currencies,” he said.

BDO chief market strategist Jonathan Ravelas echoed Hilado’s sentiment, saying the minutes of the latest US Fed meeting signaled another possible rate increase in June.

“Prospects of a rate hike boost the greenback. The recent rise in oil prices and continued outflow of foreign funds in stock market are not helping the peso,” Ravelas said.

Ravelas said the next resistance level is 53 to $1.

The peso yesterday opened weaker at 52.58 to $1 and hit an intraday low of 52.705 to $1. Volume slipped to $719 million from $899.95 million last Thursday.

Traders also cited the decision of US President Donald Trump to call off a scheduled summit with North Korean leader Kim Jong-un on June 12 in Singapore.

The local currency also lost more ground after the central bank approved a one percentage point reduction in the reserve requirement ratio for banks starting June 1. The decision is expected to free up around P100 billion in additional liquidity into the financial system.

This is the second reduction in three months as the central bank slashed the “ultrahigh” reserve requirement ratio to 19 percent from 20 percent last March 2 that released P90 billion in fresh funds into the system.

The gradual and phased reduction of the reserve requirement ratio as envisioned by BSP Governor Nestor Espenilla Jr. to a single digit level is part of the shift to a more market-based oriented implementation of monetary policy aimed at reducing the central bank’s reliance on reserve requirements for managing liquidity.

Antonio Moncupa, vice chairman and CEO at East West Banking Corp., said there is a need to monitor and address accordingly the counter effects of the reduction of the reserve requirement ratio.

With the release of more liquidity into the financial system, banks could lend more.

Economists and analysts are expecting back-to-back rate hikes by the Monetary Board to curb rising inflationary pressures. Last May 10, the central bank lifted rates for the first time in more than three years as average inflation leapt to 4.1 percent in the first four months, exceeding the BSP’s two to four percent target.

Moncupa share the same sentiment on the need for more rate hikes as latest inflation forecasts shifted higher.

“In my view, they will, in time. If they don’t, we will get the usual thing that happens when monetary authorities fall behind the curve. More painful adjustments in the future or uncontrolled inflation,” Moncupa said.