The Philippine peso plunged to a two-week low on Thursday, breaching the P59 to the dollar mark, fueled by growing anticipation of another interest rate cut by the Bangko Sentral ng Pilipinas (BSP).
The currency closed at P59.022 per dollar, a significant weakening from the previous day’s P58.92. This marked the first time in two weeks the peso had settled at this level, stirring concerns about its stability.
Trading began with the peso already under pressure, opening at P58.95. Throughout the day, it fluctuated wildly, reaching a high of P58.92 but ultimately succumbing to a low of P59.17 – a level not seen since November 12th.
The volume of dollar transactions decreased to $1.29 billion, suggesting a cautious approach from investors. Market analysts attributed the peso’s decline to recent statements from the BSP regarding the country’s economic outlook.
BSP Governor Eli M. Remolona, Jr. cautioned that the Philippines’ GDP growth might only reach 4% to 5% this year, significantly below the government’s target of 5.5% to 6.5%. This slowdown, compounded by concerns over government spending and investor confidence, has increased the likelihood of a fifth consecutive rate cut at the December 11th meeting.
The central bank has already lowered borrowing costs by a cumulative 175 basis points since August, attempting to stimulate economic activity. However, these measures appear to be battling against headwinds.
Traders predict the peso will likely trade between P58.80 and P59.20 on Friday. While a sustained stay at the P59 level is considered unlikely, the possibility remains until the anticipated surge in holiday remittances provides support.
Globally, the US dollar remained relatively stable near a five-week low, bolstered by weak economic data suggesting the Federal Reserve may also cut rates next week. This provided some relief to other currencies, including the yen and euro.
Speculation surrounding potential changes at the Federal Reserve is also influencing market sentiment. White House economic advisor Kevin Hassett is being considered to replace Jerome H. Powell as Fed Chair, and his potential appointment is raising concerns about more aggressive rate cuts.
Analysts suggest that Hassett’s appointment could weaken the dollar, as bond investors have expressed worries about his willingness to align monetary policy with President Trump’s preferences. The market is currently pricing in an 85% chance of a quarter-point rate cut by the Federal Reserve next week.
The dollar index, measuring the US currency against six major rivals, remained largely unchanged at 98.94, though it has fallen nearly 9% throughout the year. Despite recent declines, some strategists predict a potential dollar rebound in the coming year.
However, the prevailing expectation remains for a softer dollar in 2026, driven by continued anticipation of further rate cuts from the Federal Reserve.
