THE PHILIPPINE PESO could do that returning to the P59 per dollar level this year as the US dollar continues to strengthen, analysts said.
The local unit closed at P58.68 against the dollar on Monday, strengthening 5.2 centavos from Friday’s finish of P58.732.
“(The Philippine peso) was one of the worst performers in Asia last month, with BSP (Bangko Sentral ng Pilipinas) interest rate cut expectations next month adding fuel to the fire,” ING Bank said in a report.
“A move to 59 seems likely, but further negative short-term impacts should be limited,” it added.
In October 2022, the peso hit a low of P59 against the dollar, leading to inflationary pressures and prompting the central bank to intervene.
The new Trump administration’s proposals to raise tariffs and impose stricter immigration policies could pose a risk to the peso, a trader said in a phone call.
“The likelihood of it reaching P59 is (due to) the risk of US tariffs as that would boost the dollar,” the trader said.
On the other hand, the increase in remittances during the upcoming holidays would support the local currency, the trader said, making it unlikely for the peso to rise above the P59 per dollar level.
Markets expect the new Trump administration to impose trade tariffsFfs and tighten immigration, and deepen the deFicit, measures that are considered to be in placeFlationary, Reuters reported.
Meanwhile, ING said the “upside beyond P59” could be limited due to several factors such as latbest inflation data.
“(The Philippine peso) has historically been vulnerable to inFrisk. Now that Brent oil prices have settled in the mid-1970s and rice prices are correcting noticeably, the trade deficit is likely to remain limited,” the report said.
Overall inflation rose to 2.3% in October, bringing the ten-month average to 3.3%. This falls within the central bank’s target of 2-4%.
The Bangko Sentral ng Pilipinas (BSP) expects inflation to stabilize at 3.1% this year, 3.2% in 2025 and 3.4% in 2026.
ING also noted the Philippine central bank’s “historical preference to defend the P59 level.”
BSP Governor Eli M. Remolona Jr. said earlier that the central bank intervenes in the foreign exchange market when necessary to “smooth out excessive volatility and restore order during periods of stress.”
The BSP had to intervene with “small amounts” when the peso fell to the level of P58 per dollar in May, the first time it reached that level since 2022.
Meanwhile, the peso is also seen to have “relatively low sensitivity to the weakness of the CNY (Chinese yuan),” according to ING.
“In the wake of Trump’s election victory and the National People’s Congress (NPC) meeting, the CNY moved weaker from 7.10 to 7.18. The CNY is likely to be dragged along by broader dollar trends but should remain a low-volatility currency against other Asian currencies, the report said.
FURTHER WEAKNESS
On the other hand, Capital Economics said in a separate report that it expects the peso to end the year at the level of P59 per dollar, depreciating further to P62 by 2025.
It also said that currencies in Asia in general are at risk due to Trump’s proposed policy, which will keep US Treasury yields high in the coming year and put upward pressure on the dollar.
“We think Asian currencies will weaken 3-10% against the dollar between now and the end of next year, with the biggest decline coming from the renminbi (as China faces bigger rates).Ffs). The risks are that these movements are even bigger.”
“Weaker currencies can drive up the cost of imported goods and increase inflationary pressures. But given the weakness in inflation across the region, this is unlikely to be a major concern for policymakers,” it added.
Capital Economics said most Asian countries might even prefer weaker currencies to “oFsoftens the impact of higher ratesFfs.” — Luisa Maria Jacinta C. Jocson