MANILA: The Philippine peso slid past a long-defended red line for the currency to an all-time low, ramping up pressure on the central bank to respond.
The peso dropped as much as 0.5% through 59-per-dollar on Tuesday (Oct 28), a level that had held firm since 2022. The currency is the worst performer in South-East Asia this month, weighed by the prospect of more interest-rate cuts and further stock outflows.
The central bank on Tuesday said the peso continues to be supported by resilient remittances, still relatively fast economic growth, low inflation, and ongoing structural reforms.
"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,” Bangko Sentral ng Pilipinas said in a statement, adding that it allows the exchange rate to be determined by market forces.
The central bank had pledged to intervene more forcefully during periods of extended peso weakness. Traders will be watching for such moves as the currency comes under renewed pressure.
"I expect BSP to come in and signal more strongly to the market as we move past the 59-level,” said Michael Wan, a currency strategist at MUFG Bank in Singapore. "If it continues to move fast, I expect the market to test the 60-level.”
Policymakers from some of Asia’s largest economies have in recent weeks stepped in to bolster their currencies as volatility increased. The Reserve Bank of India is prepared to intervene further until the rupee settles at a stronger level, a person familiar with the matter said, while officials in South Korea have pledged to take action to stabilise markets.
"It is up to the BSP now in terms of interventions and smoothening the volatility,” said Michael Ricafort, chief economist at Rizal Commercial Banking Corp in Manila.
"Ignoring the BSP factor would be a mistake for those looking for weaker levels for the peso.”
Sentiment in the peso has worsened following Bangko Sentral ng Pilipinas’s unexpected cut in the benchmark interest rate early October. A member of the central bank’s Monetary Board on Monday further said borrowing cost will likely be lowered by 25 basis points when it meets in December, with more reductions expected in 2026.
Allegations over the widespread misuse of billions of dollars for flood-control projects have also weighed on Philippines’ growth prospects. That’s rattled investor confidence.
Foreign funds have net sold US$79 million of the nation’s equities in October, poised for the biggest monthly outflow since May. The benchmark stock index is hovering close to the lowest since April, in contrast to gains in broader Asia that pushed a regional gauge to a record high.
Philippine stocks were little changed on Tuesday. - Bloomberg
(Updates with more detail on 59-per dollar level in lead and second paragraph)
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