The Philippine peso dropped to a seven-year low against the U.S. dollar Monday as concerns rise about political instability under President Rodrigo Duterte.

The U.S. dollar rose to an intraday high of 48.26 pesos, a 0.6% pullback in the peso for the day. It was the peso's weakest level against the U.S. dollar since September 2009, worsening the monthly loss to 3.5%.

Mr. Duterte, who was elected to office in May, has lashed out at the European Union and U.S. President Barack Obama in recent weeks, often using profanity. Mr. Obama canceled a planned meeting with Mr. Duterte that would have been the first between the two leaders, after the Philippine president's outburst earlier this month.

Mr. Duterte is also embroiled in a violent anticrime campaign that has claimed more than 3,000 lives and sparked international criticism.

Last week, Standard & Poor's ratings company said the predictability of policy-making in the Philippines has "diminished somewhat" under Mr. Duterte. The firm said it may lower the country's sovereign ratings if the reform agenda stalls or if certain economic metrics deteriorate.

"It's political risk that's impacting investor sentiment," said Krystal Tan, Asia economist at Capital Economics. Mr. Duterte "is just very unpredictable. The fear that he will suddenly change his mind...is more heightened now," she added.

Investors pulled roughly $310 million out the country's stock market over the course of a month, according to a note from HSBC dated Sept. 19. HSBC characterized the outflows as significant in helping to drive the peso lower.

The Philippines' benchmark PSEi stock index has fallen nearly 2% so far this month, although it surged more than 10% in the past year.

Expectations for a slowdown in economic growth and a decline in the country's current-account surplus could be adding to downward pressure on the peso, said Joey Cuyegkeng, senior economist for Asia at ING.

Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com

 

(END) Dow Jones Newswires

September 26, 2016 04:15 ET (08:15 GMT)

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