The local currency on Monday shed more than a third of its value at the close of trading to P52.34 per dollar, its weakest since mid-2006.
The fall was the result of a 34 centavos diminution during the day from last week’s P52 per dollar closing rate.
The peso has not been this weak since July 19, 2006, when it hit P52.745 per dollar.
Trade volume had been frenetic as this almost doubled from Friday’s $578.5 million to $1.025 billion on Monday.
Just last week the Bangko Sentral ng Pilipinas (BSP) pulled a surprise by cutting the banks’ deposit reserve requirement ratio (RRR) by 1 percent, effectively releasing some P70 billion to P90 billion from its vaults.
The peso’s plunge on Monday, ING Bank Manila Senior economist Joey Cuyegkeng said, tangentially relates to the adjustment in the deposit reserves that loosely puts a dovish bias on the part of the BSP.
Cuyegkeng said this was one reason the market turned away from the peso.
The economist also added the market has interpreted the BSP decision as a show of tolerance for a slightly weaker local currency.
“We are looking for some relief next month with combined capital inflows from stock rights issuances and seasonally higher remittances,” Cuyegkeng said.
“But the relief could be temporary considering the wider trade deficit and policy rate increases in the US, which market expects to be left unmatched by BSP or BSP lags,” he added.
The local economy has since been feeling the effects of a weaker peso that translates to higher prices in imported goods, such as oil.
The manufacturing sector has also been feeling the impact of the weakened peso, saying this leads to higher production and materials costs that weakens industry growth down the line.