THE PESO is expected to stay rangebound against the dollar this week, with the market expected to track developments in the United States and Middle East.
On Friday, the local unit rose for a third straight day, strengthening by 11 centavos to close at P63.74 per dollar from its P63.85 finish on Thursday, data from the Bankers Association of the Philippines’ website showed.
However, week on week, the peso was down by 12.5 centavos from its P63.615 finish on Oct. 23.
The peso plunged to a new record-low close of P64.17 per dollar on Oct. 27.
However, it rebounded midweek, ending a seven-day slide, after President Ferdinand R. Marcos, Jr. said on Wednesday that the government will do what it can to support the peso following its descent to historic lows.
Mr. Marcos said they have the means to defend the peso and make sure its value against the dollar does not continue to decline further as the country has adequate foreign exchange (FX) reserves.
For its part, the Bangko Sentral ng Pilipinas (BSP) has said that it does not target a specific exchange rate and only intervenes in the market to smoothen out sharp swings that could be inflationary.
BSP data showed gross international reserves declined 8.31% year on year to $99.997 billion as of September. This was the lowest level in three years or since September 2023.
On Friday, the currency appreciated as the dollar index corrected overnight because of the US Federal Reserve’s dovish policy signals, a trader said by phone.
The trader added that profit taking before the long weekend also supported the peso.
“The peso continued to recover as the DXY (US dollar index) weakened amid a global selloff in AI (artificial intelligence)-related stocks. The currency also drew support from the Federal Reserve’s decision to keep rates unchanged, while the President’s commitment to defend the peso may have helped temper speculative pressures,” China Banking Corp. (Chinabank) Chief Economist Domini S. Velasquez said in a Viber message.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the local currency was buoyed by an increase in remittances to support spending for the holiday weekend.
Philippine markets were closed on Monday (Nov. 2) for All Souls’ Day.
For this week, the trader said the foreign exchange market will continue to track geopolitical developments and the US midterm elections.
The trader sees the peso moving between P63.60 and P64 against the dollar, while Mr. Ricafort expects it to range from P63.75 to P63.95.
UNDER PRESSURE
Meanwhile, analysts said external developments affecting overall risk sentiment may continue to weigh on the peso until yearend, even as support may come from an expected seasonal bump in remittances and the BSP’s hawkish stance.
Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said the currency may trade at around P63.30-P64.50 towards the end of 2026.
“The peso remains under pressure from higher inflation, expensive energy imports, and a strong US dollar…,” he said in a Viber message.
“The good news is that strong remittances, BPO (business process outsourcing) inflows, and ample reserves continue to provide support.”
Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said the currency could end this year at around P62.30 versus the greenback, but its breach of the P64 mark last month raises risks of a weakening bias.
“Elevated oil prices, persistent dollar demand, external-sector pressures, and tight global financial conditions remain the main headwinds. Seasonal remittances, BPO receipts, and the BSP’s tighter policy stance should provide some support.”
Chinabank’s Ms. Velasquez said their year-end exchange rate forecast is at P63.70.
“[A] sustained improvement in the country’s economic fundamentals remains key to restoring investor confidence and supporting the currency,” she said.
On Oct. 22, the BSP hiked rates for a fourth straight meeting as it expects inflation to accelerate further amid oil-driven price pressures and intensifying risks from a strong El Niño, delivering an outsized increase of 50 basis points (bps). This brought cumulative hikes since April to 125 bps.
Headline inflation came in at a three-and-a-half-year high of 7.2% in September as fuel, food, housing, and utility costs soared. It matched this year’s peak first seen in April and brought the year-to-date clip to 5.4%.
According to the BSP, the headline print may hit a new peak in the fourth quarter, with a hotter reading likely for the bottom 30% of income households.
The BSP expects inflation to average 6.1% this year and 6% next year, well above its 3% goal.
Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said a sustained decline in the peso could prompt an off-cycle hike by the BSP due to inflation risks.
Mr. Asuncion said the central bank’s main concern is the potential inflationary impact of extended peso weakness.
“A weaker currency raises import costs and could add to already elevated price pressures, reinforcing the need to keep monetary policy restrictive while using FX intervention mainly to smooth excessive volatility,” he said.
“We do not think peso weakness alone warrants an off-cycle hike. That risk would rise if depreciation becomes disorderly and materially worsens inflation expectations or generates broader second-round effects. For now, the BSP can complement its policy rate with calibrated FX intervention, liquidity management, and clear forward guidance.”
Mr. Ravelas likewise said the central bank is likely to keep a close watch on the FX market.
“For now, the BSP is likely to stay vigilant rather than rush into an off-cycle move, using a mix of intervention, liquidity management, and clear policy signals to keep currency volatility orderly and inflation expectations anchored.” — Aaron Michael C. Sy