THE PHILIPPINE PESO could hit the P60-per-dollar level in the first half of 2025, DBS Bank said.
In a recent report, DBS said the local unit could settle at P60 against the greenback from the first quarter to the second quarter of 2025.
It then expects the peso to rebound to P58.90 by the third quarter and to P57.30 by end-2025.
DBS said it adjusted its currency forecasts to “reflect a bias towards a stronger US dollar at the onset of Trump’s second term.”
“Although markets viewed Trump’s tariffs as a transactional policy approach to extract leverage in negotiations, not all countries would be willing or able to meet his demand, resulting in retaliatory measures, straining US rela-tions with key allies and trading partners,” it said.
“Apart from undermining business confidence and investments, tit-for-tat trade wars would also hamper or halt the Fed’s ability to lower interest rates. Overall, Trump’s policy agenda is a complex mix of initiatives that sparked much debate seeking coherence. Their impact remains as uncertain as its implementation and global responses.”
US President-elect Donald J. Trump has promised to impose restrictive tariffs on Chinese imports as well as a universal tariff. Markets are anticipating the inflationary pressures that could come from these duties.
This year, DBS expects the peso to average P59.10 against the dollar.
The peso closed at its all-time low of P59 per dollar on Nov. 21 and 26.
FED EASING CYCLEIn a separate report, the ASEAN+3 Macroeconomic Research Office (AMRO) noted several shocks that could cause the peso to weaken further versus the greenback.
“The peso may continue to experience high volatility amid uncertainties over monetary policy decisions both at home and abroad, the global growth outlook, and geopolitical concerns,” it said.
“Against this backdrop, the peso should continue to be determined by the market and serve as a shock absorber for the economy. Judicious foreign exchange interventions should be employed from time to time to address ex-cessive volatility.”
AMRO said possible delays in the US central bank’s easing cycle could affect the local currency.
“A slower-than-expected monetary policy easing in the US compared to market expectations can trigger a peso depreciation and an increase in Philippine government bond yields,” it said.
“Even though the Federal Reserve already started cutting the federal funds rate in September, there remain uncertainties in the pace of further easing for the rest of this year and into 2025. As a result, the pace of US monetary policy easing still warrants close monitoring, as a slower-than-expected pace can trigger renewed peso depreciations.”
AMRO said that while a weaker peso would benefit overseas Filipino workers and exporters, this would place the country at risk as “large depreciations can exert upward pressures on the prices of imported goods.”
“Higher import prices can cause significant burdens on importers and manufacturers, and potentially consumers if the higher prices are passed on,” it said.
“Moreover, slower US monetary policy easing can contribute to an increase in the Philippine government bond yields, which are highly correlated with US Treasury yields. This will raise the government’s funding costs.” — Luisa Maria Jacinta C. Jocson