philippine peso Violation The P59-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 would allow market forces to determine the peso-dollar exchange rate.
The local unit closed at P59.13 against the greenback, down 23 centavos from its P58.90 on Monday, data from the Bankers Association of the Philippines showed.
This was the all-time low for the peso, breaking the previous record of P59 set on December 19, 2024.
Year to date, the peso has declined by P1.285 or 2.17% from its close of P57.845 on December 27, 2024.
The peso opened steady at P58.90 against the dollar in Tuesday's session, already its intraday best. Its worst performance was at P59.20 against the greenback.
Dollar turnover rose from $1.6 billion on Monday to $1.75 billion on Tuesday.
“The recent peso depreciation may reflect market concerns over a potential slowdown in economic growth due to the infrastructure spending dispute 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 into 2026, as the economy may slow down “a little” due to the corruption scandal and trade uncertainties.
The BSP cut interest rates by 25 basis points (bps) to 4.75% earlier this month. It has cut rates by 175 bps since its launch Easing cycle in August 2024.
The BSP said the peso would continue to be supported by “resilient remittance flows, still relatively fast economic growth, low inflation and ongoing structural reforms.”
“Business process outsourcing, tourism and foreign exchange inflows from overseas Filipino workers continue to cushion external shocks,” it said.
It also said it continued to maintain “strong” foreign reserves, which stood at $108.8 billion at the end of September.
'Market forces'
The BSP also indicated that it could tolerate further weakness in the peso.
“When we participate in the market, it is largely to smooth out inflationary fluctuations in the exchange rate over time rather than to prevent large-scale day-to-day volatility.”
The peso declined after the latest BSP signals, a trader said in an e-mail.
“The peso closed at a record high after the BSP ruled out any near-term intervention in the local FX (foreign exchange) market despite obvious pressure on the local currency,” the trader said.
Christina S., head of research at First Metro Investment Corp. The peso's recent weakness is likely to have minimal impact on inflation, Ulang said in a Viber message.
“In terms of inflation, the pass-through is really small because of the peso-dollar weakness, but of course, confidence levels are going down because of the weak peso,” he said.
Another trader said in a text message that the peso could remain at the P59 level in the short term if the weakness persists, but this could be offset by a seasonal increase in remittances at the end of the year.
“Seasonally, we expect dollar inflows due to remittances. Therefore, we expect natural support for the peso going forward,” the trader said.
Rizal Commercial Banking Corporation Chief Economist Michael L. Ricafort said in a Viber message that local sentiment could be supported by reforms aimed at addressing corruption.
“The US dollar/peso exchange rate will now be a function of the BSP in terms of smoothing out volatility, which is one of the key catalysts going forward,” he said.
“Thus, it would be a mistake for those looking for a higher level to ignore the BSP factor.”
For Wednesday, both Mr. Ricafort and First Trader see the peso rising from P58.95 to P59.20 per dollar. , AMCSy
