Peso Seesaw Can It Plunge Further to P63$1 Amid Global Uncertainties? Let me know if you'd like me to help with anything else!

Title Peso Seesaw Can It Plunge Further to P63$1 Amid Global Uncertainties?

As global uncertainties persist, particularly in relation to US trade and fiscal policies, the peso may be heading towards new all-time lows. According to Maybank Research, the currency could hit a fresh record low of P60 to the dollar in the first quarter of 2025, followed by a potential plunge to P63$1 in April-June, and then settle at P61 versus the greenback for the remainder of the year.

Forecast Highlights

Maybank's forex research head, Saktiandi Supaat, attributes the potential decline to uncertainty surrounding US policies. He notes that US dollar (USD) yields are expected to remain elevated and volatile in the first half of 2025, supporting the USD further. However, he expects USD easing to manifest after trade volatility eases off in the second half of 2025, leading to some easing in USD-PHP towards P60 and below by the end of 2025.

The Peso's Recent Performance

The peso has already reached a record low of P59 to the dollar, which was seen in October 2022 when the Bangko Sentral ng Pilipinas (BSP) was perceived as not being aggressive enough in hiking interest rates to combat inflation. This level was again reached in November last year on concerns over the pace of central bank easing and likely protectionist policies to be implemented by US President-elect Donald Trump.

Recent Market Developments

Despite recovering to the P58$1 level, the peso has wobbled this month after US President Trump launched a trade war against major trading partners and threatened to expand it to all other countries. The peso closed at P58.19 to the dollar on Wednesday, unchanged from the previous day.

Factors Influencing the Peso

Supaat suggests that aggressive US trade policies could further strengthen the dollar and weigh on the peso. Maybank's worst-case scenario modeling implies that if a 60-percent tariff were imposed on Asian exports, the peso could weaken beyond current projections.

Potential Mitigating Factors

However, Supaat notes that repatriation of funds by overseas workers can help limit PHP weakness. He also expects BSP rate cuts to add to peso volatility, particularly in light of recent global events.

Outlook

As the world navigates these uncertain times, it remains to be seen whether the peso will indeed plunge further to P63$1 or settle at a more stable level. One thing is certain, though the trajectory of this currency will continue to be shaped by global market fluctuations in 2025.

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Keywords Peso, USD, US trade and fiscal policies, Maybank Research, Saktiandi Supaat, Bangko Sentral ng Pilipinas (BSP), foreign exchange rates

Edward Lance Arellano Lorilla

CEO / Co-Founder

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