MANILA - The Philippine peso depreciated further closing at P56.37 to $1 on Tuesday from the previous close of P55.979, according to data from the Bankers Association of the Philippines.

The peso also hit 56.45 during intraday trading, which was a record low last reached in October 2004.

Tuesday's exchange rate marked the second time the peso breached the P56 level this year.

• Peso slides to 56.06 to $1, weakest in almost 17 years

But there is more room for further weakening, Regina Capital Development Corp Technical and Equity Analyst Corenne Agravio told ANC.

The US Federal Reserve is widely expected to aggressively raise its benchmark borrowing rate again by the end of July, a few weeks ahead of the Bangko Sentral ng Pilipinas' scheduled monetary policy-setting meeting on Aug. 18.

"The peso could further weaken in the short term, especially with the Fed’s upcoming meeting in July. Everyone’s expecting a 75-basis-point hike against the BSP which is meeting next month. That gives us a few weeks of window between the Fed and BSP," she said.

• Fitch Solutions sees PH current account deficit widening, peso remaining weak
• PH trade deficit widens to $5.68 billion in May

Manulife Investment Management Head of Global Macro Strategy Asia Sue Trinh meanwhile said the country's "rapidly widening twin deficits" are the main issues.

Trinh said the country's current account and fiscal deficits will linger and are likely to weigh on the economy and the local currency.

"From the currency perspective, the peso is still relatively overvalued when you look at its performance...By many measures that’s still relatively high given the metrics that we look at," Trinh told reporters in a briefing.

Meanwhile, the Philippine Stock Exchange Index (PSEi) closed at the 6,349.94 level Tuesday, losing 38.70 points or 0.61 percent.

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