THE peso on Thursday fell to its lowest level since October, hovering near P44 after domestic inflation in May jumped to 9.6 percent, its highest in nine years, putting pressure on the peso-dollar exchange as investors continue to avoid the local currency, traders said.

The local currency opened at P44 per dollar. It went as high as P44 and as low as P44.1 before closing at P43.945 from the previous day’s P43.75. Total trade volume was $332 million from the previous day’s $687.  

A trader from a commercial bank said the central bank started selling dollars at P44.1 to prop up its currency.

“As expected, high inflation is putting pressure on the peso-dollar trade. Investors continue to be risk averse and are closely watching the central bank on how it will act to address the pressure,” the trader said.

As expected, the central bank also raised interest rates.

Jonathan Ravelas, a market strategist at Banco de Oro, said the hiking of interest rates will act as a “deterrent to demand,” or a way to siphon off spending.

“Despite the expected action that Bangko Sentral ng Pilipinas will hike rates, the peso went down. That’s because we’re better off with dollars. The Philippine economy has more risks than the US. We’re in a slowing economy, it’s a deterrent to demand,” he explained.

He said, however, that despite the central bank’s inflation control, high commodity prices will continue to bog the peso down. 

STANDARD and Poor’s (S&P) has given the country’s debt-exchange warrants a recovery rating of “3” to indicate a 50-percent to 70-percent chance of principal recovery in the likelihood the state defaults on its foreign-currency obligations.

PIONEER Insurance, a 50-year-old mid-sized insurer, yesterday renewed calls for the reduction of “heavy” taxes imposed on insurance firms, saying these will only mean lower returns for the companies and also result in higher policy cost for clients.

STRONG growth in economies like India and China help exacerbate global inflationary pressures, and while demand for oil rises, the oil market is unprepared, officials of bilateral and multilateral institutions said Thursday.

THE peso on Thursday fell to its lowest level since October, hovering near P44 after domestic inflation in May jumped to 9.6 percent, its highest in nine years, putting pressure on the peso-dollar exchange as investors continue to avoid the local currency, traders said.