Philippine Peso Nears Record Low as Interest Rate Cuts Loom
Amidst concerns over slowing economic growth, the Philippine peso is approaching an all-time low as the Bangko Sentral ng Pilipinas (BSP) plans further interest rate cuts.
Analysts Forecast Peso Weakness
Goldman Sachs Group Inc., Barclays Plc, and Fitch Solutions predict the peso will test the 60-peso-per-dollar mark by midyear, while DBS Group Holdings Ltd. forecasts a drop to 60.8. The peso closed at 58.420 on Monday, close to the historic low of 59 per dollar reached in December.
Factors Driving Weakness
The Asian markets have been impacted by the strength of the US dollar as investors assess the potential impact of President Donald Trump's policies. The Philippine peso has been particularly hard-hit, having fallen 2.4% since the BSP began cutting rates, outpacing regional peers and the Federal Reserve.
The BSP has intervened in the foreign exchange market to reduce the peso's volatility, while lowering rates by a total of 75 basis points since August. Despite the interventions, further rate cuts are likely, although the pace may slow due to geopolitical tensions and US policy uncertainties.
Trump Policies and Geopolitical Risks
Analysts caution that Trump's policies, such as aggressive tariffs or trade disputes, could exacerbate the peso's downtrend. The Philippines may have missed its 6% growth target in 2025, contributing to the peso's weakness.
Economic Events in Asia
This week, several key economic events in Asia will be watched, including China manufacturing and non-manufacturing PMI (Jan. 27), Australia NAB business confidence (Jan. 28), and Philippine GDP (Jan. 30).