Peso slumps to new all-time low

The Philippine peso breached the PHP 59-per-dollar level for the first time on Tuesday, amid market concerns of slowing economic growth and expectations of further monetary easing.   

At the same time, the Bangko Sentral ng Pilipinas (BSP) said it will allow market forces to determine the peso-dollar exchange rate.

The local unit closed at PHP 59.13 versus the greenback, sinking by 23 centavos from its PHP 58.90 finish on Monday, Bankers Association of the Philippines data showed.

This was a new all-time low for the peso, eclipsing the previous record of PHP 59 logged on Dec. 19, 2024.

Year to date, the peso has depreciated by PHP 1.285 or 2.17% from its PHP 57.845 finish on Dec. 27, 2024.

The peso opened Tuesday’s session steady at PHP 58.90 versus the dollar, which was already its intraday best. Its worst showing was at PHP 59.20 against the greenback.

Dollars exchanged rose to USD 1.75 billion on Tuesday from USD 1.6 billion on Monday.

“The recent peso depreciation may reflect market concerns over a potential moderation in economic growth due in part to the infrastructure spending controversy, as well as expectations of additional monetary policy easing by the BSP,” the central bank said.

On Monday, Monetary Board member Benjamin E. Diokno said the BSP may cut its key interest rate again in December and further in 2026, as the economy may “slow down a bit” due to a 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.

The BSP said the peso will continue to be supported by “resilient remittance inflows, still relatively fast economic growth, low inflation, and ongoing structural reforms.”

“Foreign exchange inflows from business process outsourcing, tourism, and overseas Filipino workers continue to buffer external shocks,” it added.

It also said it continues to maintain “robust” foreign reserves, which stood at $108.8 billion at end-September.

‘Market forces’

The BSP also signaled it may tolerate more weakness in the peso.

“When we do participate in the market, it is largely to dampen inflationary swings in the exchange rate over time rather than to prevent day-to-day volatility,” it said.

A trader said in an e-mail that the peso fell after the BSP’s latest signals.

“The peso closed to record levels after the BSP ruled out any near-term intervention in the local FX (foreign exchange) market despite apparent pressures on the local currency,” the trader said.

First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message the peso’s recent weakness will likely have a minimal impact on inflation.

“In terms of inflation, the pass-through is really small coming from the peso-dollar weakness, but of course, the confidence level is being eroded by the weak peso,” she said.

Another trader said in a text message that the peso could remain at the PHP 59 level in the short term if weakness persists, but this could be offset by the seasonal increase in remittances towards the yearend.

“Seasonally speaking, we expect dollar inflows courtesy of remittances. So, we expect natural support for the peso moving forward,” the trader said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that local sentiment could be supported by reforms toward addressing corruption.

“The US dollar/peso exchange rate would now be a function of the BSP in terms of smoothening the volatility, as one of the major catalysts going forward,” he said.

“Thus, ignoring the BSP factor would be a mistake for those looking for higher levels.”

For Wednesday, both Mr. Ricafort and the first trader see the peso moving at PHP 58.95 to PHP 59.20 per dollar. — A.M.C.Sy