The Philippine peso fell 45 centavos to close at 63.7 per U.S. dollar on Thursday, Nov. 12, from 63.25 a day earlier, as a broad rally in the greenback met fresh doubts about the Philippine economy. The main stock index slipped 0.57% to 5,660.55, The Manila Times and the Daily Tribune reported.

The two moves came together for a reason. Investors who own Philippine assets are now paying for a weaker currency and a weaker growth outlook at the same time, and Thursday's session offered little relief from either. For foreign funds, the peso's slide erodes returns on local stocks and bonds even on days when prices hold. For Philippine companies with dollar debt or imported fuel bills, each centavo adds cost.

Dollar strength and U.S. rate bets weigh on the peso

The peso opened at 63.25 and weakened through the day, according to The Manila Times. Michael Ricafort, chief economist at Rizal Commercial Banking Corp., told the paper the dollar's gains against major currencies had "increased the odds of future US Fed rate hike."

The pressure was not limited to Manila. Interest rate futures show a quarter-point increase is widely expected at the Federal Reserve's December meeting, and traders are also weighing the chance of a half-point move, the Malaysian news agency Bernama reported on Friday. The ringgit weakened to 4.0845 per dollar at Friday's 6 p.m. close in Kuala Lumpur from 4.0765 on Thursday. The ringgit also eased slightly against the peso, to 6.41 per 100 pesos from 6.40. Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia, linked the dollar's gains to what he called "a hawkish US interest rate outlook."

The peso had little room to absorb another shock. It has fallen almost 7% this year, making it Asia's second-worst-performing currency, Bloomberg reported on Nov. 9 in a story carried by The Edge Malaysia. Inflation reached 7.8% in October, the fastest in almost four years, and has been above the Bangko Sentral ng Pilipinas' 3% target since March. The central bank raised its policy rate by 50 basis points in October. Capital Times reported earlier on October's inflation surge and on a government bond auction that fell short as yields climbed.

PSEi falls as BMI cuts Philippine growth forecasts

On the stock exchange, the selling was broad. Decliners outnumbered advancers 131 to 41, with 62 issues unchanged, and value turnover was a thin 6.71 billion pesos excluding block sales, The Manila Times reported.

Luis Limlingan, head of sales at Regina Capital Development Corp., told the paper that investors stayed cautious after research firm BMI lowered its Philippine growth forecasts. The cut followed data released on Nov. 9 showing gross domestic product grew 2.1% from a year earlier in the third quarter, down from 2.4% in the second quarter and a full percentage point below the 3.1% median estimate in a Bloomberg survey. It was the fifth straight quarter in which growth slowed more than expected. Economic Planning Secretary Arsenio Balisacan has called the government's 2026 target of 3.5% to 4.5% "very challenging" to reach, according to Bloomberg.

Mining and oil shares fell 3.91%, the steepest drop among sectors, and industrials lost 1.78%. Holding firms fell 0.76% and services 0.37%.

Meralco and PLDT fall ahead of MSCI exits

Index changes added to the selling. Manila Electric Co. (Meralco) and PLDT Inc. declined ahead of their removal from MSCI indexes, AB Capital Securities said, according to The Manila Times. Deletions from MSCI benchmarks force passive funds that track them to sell.

ACEN Corp. led index losers with an 8.05% fall. Semirara Mining and Power Corp. dropped 6.91% and GT Capital Holdings Inc. lost 5.35%.

A few large names went the other way. San Miguel Corp. rose 4.10% and Globe Telecom Inc. gained 4.06%, while Universal Robina Corp. and JG Summit Holdings Inc. also advanced. Shares linked to the GCash mobile wallet rose on foreign buying, AB Capital said. Foreign investors were net buyers of 329 million pesos for the day, even as the index fell.

The information technology sector posted the largest value turnover, at 2.15 billion pesos.

What comes next

The policy calendar now matters more than the data calendar. BPI lead economist Emilio Neri Jr. has said the Bangko Sentral may choose a smaller rate increase in December because of concerns about growth, Bloomberg reported. That would leave the central bank balancing an inflation rate more than twice its target against an economy expanding at about half the pace of Indonesia or Malaysia.

The Fed's December decision is the other date on traders' screens. A U.S. increase in December would narrow the gap between U.S. and Philippine rates unless the Bangko Sentral matches it. The peso, which lost 45 centavos in one session this week, is where that pressure would show first.