By Aaron Michael C. Sy, Reporter
THE PESO could slide to the P60-per-dollar level amid a dovish central bank and market concerns over corruption issues, analysts said.
On Wednesday, the local unit closed at P58.69 versus the greenback, recovering by 44 centavos from the previous day’s record low of P59.13, Bankers Association of the Philippines data showed.
“P60 (per dollar) is probable, but not a done deal. The Bangko Sentral ng Pilipinas (BSP) has the firepower to defend the peso, and our core fundamentals are still solid. What’s weighing us down is uncertainty — especially from the floodgate scandal/tariff uncertainty which caused the dollar to strengthen,” Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message.
MUFG Global Markets Research said in a note on Wednesday that the peso’s depreciation has been more severe than expected.
“While we had already been anticipating some headwinds to PHP (Philippine peso) from a more dovish BSP, coupled with the corruption issues arising from flood control projects, the move in PHP has admittedly been weaker than we anticipated,” MUFG said.
“We were expecting other offsetting positives such as lower inflation, strong private investment including in renewable energy projects, an expected pickup in FDI (foreign direct investment) from the past surge in FDI approvals, coupled with seasonal inflows from remittances to boost the PHP. Admittedly, this has not happened yet,” it added.
Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said in a report that the peso depreciation has been driven by high crude oil prices, BSP’s dovish stance, net foreign selling in the stock market and the substantial current account deficit.
Mr. Neri said the BSP might continue to let the peso depreciate as inflation expectations remain below target.
“Also, allowing the peso to weaken might be a strategic move for them since a weaker peso could support growth and household spending through its impact on remittances. Recent statements from central bank officials indicate that supporting growth is a greater priority in the near term,” he said.
The BSP said in a statement on Tuesday that it would not intervene in the foreign market to offset day to day volatility, and will instead focus on minimizing the peso’s impact on inflation.
“Expect BSP to act decisively if global shocks worsen or volatility spikes,” Mr. Ravelas added.
The peso opened Wednesday’s session at P59.15 versus the dollar. Its intraday best was P58.65, while its worst showing was P59.26 — an all-time intraday low against the greenback.
Dollars exchanged rose to $2.01 billion on Wednesday from $1.75 billion on Tuesday.
“The peso appreciated as market participants took profit from (Tuesday’s) lows. This is also in anticipation of likely dovish policy signals from the US central bank overnight, which will continue to drive strength into the local currency (on Thursday),” a trader said in a Viber message on Wednesday.
The US Federal Reserve is widely expected to cut interest rates by a quarter of a percentage point to the 3.75%-4% level on Wednesday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the peso was also supported by remittances sent by overseas Filipino workers (OFWs) to their families ahead of the long holiday weekend.
“This is followed by the start of Christmas holiday-related spending, thereby making it more attractive for some OFWs and other US dollar earners to convert their US dollars for pesos near the record high,” he added.
For Thursday, Mr. Ricafort sees the peso moving between P58.45 and P58.80 per dollar, while the trader sees it ranging from P58.60 to P58.85.
Meanwhile, Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message that the peso’s prolonged depreciation could prompt the BSP to be more cautious due to its potential inflationary impact.
“Imported fuel, food, and materials get pricier, and those costs tend to feed into consumer inflation after a few months. It’s not an instant hit, but a sustained weak peso could make the BSP more cautious if inflation expectations rise,” he said.
Monetary Board member and former BSP Governor Benjamin E. Diokno has said the central bank may cut its key interest rate again in December and further in 2026 to offset a possible drag on growth caused by the corruption scandal and trade uncertainties.
The BSP earlier this month lowered interest rates by 25 basis points (bps) to 4.75%. It has cut rates by 175 bps since it began its easing cycle in August 2024.
Mr. Limlingan said the US dollar’s persistent strength due to a strong US economy could keep the peso under pressure despite easing trade tensions.
“Unless US data soften, the peso might stay under pressure,” he said.
Mr. Limlingan said the seasonal increase in remittances in the last two months of the year may slow the peso’s slide but the dollar is likely to remain strong.
“Import-heavy industries, manufacturing, retail, and firms that have foreign-denominated debt exposure would feel the squeeze since everything they bring in costs more in peso terms,” he said.
Meanwhile, export-related industries, BPOs (business process outsourcing), and OFWs will benefit from the peso depreciation.
Another trader said in an e-mail that consumer-heavy companies could be hit, as well as companies that import oil and have high exposure to dollar-denominated debt.
The trader said banks could see improved trading gains if they are able to take advantage of the foreign exchange volatility.
A weak peso is also beneficial for the property sector as this would lower property prices for foreign buyers, the trader said.
