MANILA, Philippines — The peso is expected to weaken past 59 against the dollar by the second quarter of 2025, according to HSBC, which attributed the likely depreciation to seasonal and external factors.
“We do think it will depreciate beyond 59. Most probably the risks are toward the second quarter of 2025,” HSBC economist for ASEAN Aris Dacanay told reporters in a briefing.
“But we need to put it into context. We think all Asian currencies will depreciate across the board, but the Philippine (peso) will be the more resilient one.”
Dacanay said there are three key reasons why the peso is likely to be more robust amid a general weakening of Asian currencies. First, the Philippine economy is relatively less exposed to tariff-related shocks, which tend to influence currency movements in other ASEAN markets.
The Bangko Sentral ng Pilipinas (BSP) also holds substantial reserves compared to its regional peers and has actively managed currency volatility, providing a buffer against abrupt swings.
Lastly, Dacanay said strong domestic economic growth is expected to underpin the peso’s resilience, mitigating the extent of the depreciation.
“Across the board, the dollar will strengthen and all other Asian currencies will depreciate. But the Philippines will depreciate to a lesser extent. I do think it comes in the second quarter, when the favorable seasonality actually diminishes,” he said.
While acknowledging the peso’s likely dip beyond 59 to $1, Dacanay dismissed scenarios of a more drastic weakening.
“I don’t think 60 or 62 is much of an issue. We don’t think it will range that low,” Dacanay said.
He said HSBC has adjusted its forecast for when the BSP would achieve a policy rate of five percent, moving the timeline from early second quarter to the third quarter of 2025.
“The BSP will need to follow the US Federal Reserve and gradually cut interest rates as well to keep the peso stable,” he said.
Dacanay said the BSP’s monetary policy decisions are intricately linked to the peso’s volatility and inflation dynamics, which limits its independence from the US central bank.
“Technically, the BSP can be fully independent with the Fed if the correlation between the forex and inflation is minimal. For example, if the forex adjusts and the peso suddenly reaches 50 to $1, that actually gives the BSP room to cut rates,” he said.
“But in reality, forex and inflation are very much well-connected. You have to be mindful of Fed moves,” Dacanay said.
The peso’s performance against the greenback reflects ongoing external pressures and market dynamics, which influence emerging market currencies. The local currency closed at 58.395 to $1 yesterday, weakening by 21 centavos from its 58.185 to $1 finish on Tuesday.