THE Bangko Sentral ng Pilipinas (BSP) may need to step up its interventions in the foreign exchange market if peso volatility heightens due to Federal Reserve decisions and policies implemented by US President-elect Donald Trump.
“In the coming months, the BSP will need to intervene more actively as US interest rate changes continue to add volatility to the peso,” BMI Country Risk & Industry Research said in a commentary on Tuesday.
The peso has been under significant pressure, BMI noted, and could trade within the 55.20-59.20:$1 range over the course of 2025 due to a hawkish Fed stance that has strengthened the dollar and pressured emerging market currencies.
The peso, it added, could also breach its record low of P60:$1 if Trump enacts aggressive protectionist policies, such as imposing blanket tariffs on US imports.
The BSP has already been intervening to stabilize the currency as evidenced by a decline in the Philippines’ gross international reserves (GIR), which fell for a third straight month to $106.84 billion in December.
The result fell below the central bank’s end-year GIR estimate of $109 billion.
Efforts to counter a potential peso slide will likely increase, BMI said, as the BSP is expected to continue cutting interest rates, albeit at a slower pace than previously expected, but still more than the Fed.
“Persistent intervention by the BSP in the FX (foreign exchange) market will help curb depreciatory pressures on the peso,” the Fitch unit said.
“But even so, earlier rate cuts by the BSP relative to the Fed will still weigh on the currency.”
BMI said the BSP could reduce rates by a total of 75 basis points this year, while the US central bank is likely to order fewer cuts.
The peso also faces long-term challenges as the Philippines’ “twin deficits”— a current account deficit projected to widen to 2.5 percent of gross domestic product (GDP) and a fiscal deficit seen rising to 5.9 percent of GDP this year — will continue to weigh on the currency.
“The Philippines is set to run historically wider current and fiscal account deficits over the coming years, which will be the main drag on the currency,” BMI said.
Also on Tuesday, HSBC Global Research said the peso was facing uncertainties, but added that the currency would remain resilient.
“We are bullish on the PHP (Philippine peso) and expect it to stay resilient at 59.8 against the USD (US dollar) by end-2025,” it said in a separate commentary.
HSBC said the peso was likely to face “volatility from a stronger dollar but its high carry will be a buffer.”
This will prompt the BSP to lower its policy rate to 5.0 percent by the third quarter of 2025, it added, as monetary authorities seek to carefully manage external risks.
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