By Aaron Michael C. Cy, reporter
PESO may slide towards The P60 per dollar level fell amid market concerns over a dovish central bank and corruption issues, analysts said.
On Wednesday, the local unit closed at P58.69 against the greenback, up 44 centavos from the previous day's record low of P59.13, according to the Bankers Association. Data from the Philippines revealed.
“P60 (per dollar) is possible, but the deal is not done. The Bangko Sentral ng Pilipinas (BSP) has the ability to defend the peso, and our core fundamentals are still solid. What is weakening us is the uncertainty – especially from the flood scandal/tariff uncertainty which caused the dollar to strengthen,” said Jonathan L. Reyes Tacundong & Co., senior advisor. Ravelas said in a Viber message.
MUFG Global Markets Research said in a note on Wednesday that the peso's devaluation has been more severe than expected.
“While we were already anticipating some headwinds for the PHP (Philippine peso) from corruption issues arising from flood control projects as well as the more modest BSP, the move in the PHP has been weaker than we anticipated,” MUFG said.
“We were expecting other discountsEstablishing positives such as low inflation, strong private investment including renewable energy projects, an expected increase in FDI (foreign direct investment) from the previous surge in FDI approvals, as well as seasonal inflows from remittances to boost the PHP. Of course, this has not happened yet,” it said.
Bank of the Philippine Islands chief economist Emilio S. Neri, Jr. said in a report that the peso's depreciation was driven by high crude oil prices, the dovish stance of the BSP, net foreign sales in the stock market and a substantial current account deficit.
Mr Neri said the BSP may continue to devalue the peso as inflation expectations remain below target.
“Furthermore, letting the peso weaken could be a strategic move for them as 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 bigger 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 smooth out day-to-day volatility, and would instead focus on reducing the peso's impact on inflation.
“The BSP is expected to act decisively if global shocks worsen or instability increases,” Mr Ravelas said.
The peso opened Wednesday's session at P59.15 against the dollar. Its intraday best was P58.65, while its worst performance was P59.26 – its intraday lowest ever against the greenback.
Dollar exchange increased from $1.75 billion on Tuesday to $2.01 billion on Wednesday.
“The peso appreciated as market participants took profits from (Tuesday's) low. This is also in anticipation of possible dovish policy signals from the US central bank overnight, which will continue to strengthen the local currency,” a trader said in a Viber message on Wednesday.
The US Federal Reserve is widely expected to cut interest rates by a quarter percentage point on Wednesday to 3.75%-4%.
Rizal Commercial Banking Corporation Chief Economist Michael L. The peso also received support from remittances sent by overseas Filipino workers (OFWs) to their families ahead of the long holiday weekend, Ricafort said in a Viber message.
“This is followed by the onset of Christmas holiday-related spending, making it more attractive for some OFWs and other US dollar earners to convert their US dollars into pesos at near record highs,” he said.
For Thursday, Mr. Ricafort sees the peso rising between P58.45 and P58.80 per dollar, while traders see it ranging between P58.60 to P58.85.
Meanwhile, Louis A., head of sales for Regina Capital Development Corp. Limlingan said in a Viber message that a prolonged depreciation of the peso could prompt the BSP to be more cautious because of its potential inflationary impact.
“Imported fuel, food and materials become expensive, and these costs get factored into consumer inflation after a few months. This is not an instant hit, but a sustained weak peso could make the BSP more cautious as 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 in December and again in 2026 to address a potential drag on growth caused by a 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 the start of its easing cycle in August 2024.
Mr Limlingan said the US dollar's continued strength due to the strong US economy could keep the peso under pressure even as trade tensions ease.
“Unless US data softens, the peso may remain under pressure,” he said.
Mr Limlingan said a seasonal increase in remittances in the last two months of the year could slow the peso's decline but the dollar was likely to remain strong.
“Companies in import-heavy industries, manufacturing, retail and those with foreign debt exposure will feel the pressure because the cost of what they bring in is higher in peso terms,” he said.
Meanwhile, export-related industries, BPOs (Business Process Outsourcing) and OFWs will benefit from peso depreciation.
Another trader said in an email that consumer-heavy companies could suffer losses, as well as companies that import oil and have high exposure to dollar-denominated debt.
The trader said banks may see an improvement in trading profits if they are able to take advantage of foreign exchange volatility.
The trader said the weaker peso is also beneficial for the property sector as it will lower property prices for foreign buyers.
