MANILA (UPDATE) - The Philippine peso weakened further closing at P56.06 to the US dollar, just six trading days after it breached the 55 to $1 level, according to the Bankers Association of the Philippines website. 

The local currency has shed more than P5 in value since the start of the year. It closed at P50.999 to the dollar on January 3, the first trading day of 2022.

A weak peso means the country has to pay more for its imports such as oil and food, whose prices have already shot up due to uncertainties caused by Russia’s invasion of Ukraine. 

Bangko Sentral ng Pilipinas Governor Felipe Medalla however earlier downplayed the depreciation of the peso saying this was caused by the strengthening of the US dollar.

The US Federal Reserve has been aggressively raising interest rates in a bid to tame inflation, which has reached 40-year highs in the United States. High US interest rates have made the dollar stronger against other currencies. 

Medalla has said that the weak peso would benefit OFW families, exporters and BPOs who will earn more from their dollar receipts.

But Medalla also said the BSP would “participate in the market to address excessive short-term volatility.”

An analyst meanwhile has warned that the peso's rapid depreciation could further stoke inflation, which already reached an almost 4-year high of 6.1 percent in June.

“A very rapid depreciation of your currency could make that worse, it can fan the flames of even higher inflation,” said BPI lead economist Jun Neri in an interview with ANC on Wednesday. 

Neri has urged the BSP to raise its benchmark rate, which currently is at 2.5 percent, to help check the peso’s slide.

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