Peso slides to record low, closes at 61.30:$1

MANILA, Philippines — The peso sank to a fresh record low yesterday, breaching the 61-per-dollar level for the first time as persistent global headwinds and firm dollar demand continued to pressure the local currency.

Data from the Bankers Association of the Philippines showed the peso closed at 61.30 per dollar, weaker by 59 centavos than Monday’s 60.71 finish.

The local currency opened at 60.80 against the greenback and traded between 60.77 and 61.30 during the session.

The latest slide came despite the Bangko Sentral ng Pilipinas (BSP)’s recent policy tightening, underscoring the dominance of external factors such as elevated US interest rates, a stronger dollar and risk aversion toward emerging markets.

SM Investments Corp. group economist Robert Dan Roces said the peso’s move beyond 61 should not be interpreted as a failure of the BSP’s intervention.

“The move above 61 does not mean the BSP hike failed. It helped, but stronger forces are at work. US rates are still high, the dollar is strong and money is moving out of emerging markets,” Roces said.

He added that steady domestic demand for dollars from importers has also weighed down the currency.

“The market is looking at where rates are headed, not just the last move, and may still be seeing a narrow gap with the US. The peso’s weakness is driven more by global factors and the hike likely slowed the drop rather than reversed it,” he said.

HSBC ASEAN economist Aris Dacanay said the weakness of the peso continues to be driven by uncertainty over the Strait of Hormuz as well as broader tensions involving the United States and Iran.

Dacanay said the BSP appears to have become more tolerant of a weaker peso, recognizing that some currency softness can help support the export sector at a time when domestic demand is soft.

At the same time, Dacanay stressed there is no specific exchange-rate level that should automatically trigger intervention, saying the BSP’s framework remains market-determined.

He warned that excessive defense of the peso could create longer-term financial risks by discouraging businesses and investors from hedging their forex exposure.

Instead, he said the BSP should focus on preventing sharp and disorderly moves rather than resisting gradual depreciation.

“As long as it’s market driven, and where the direction of the volatility is managed quite well, that’s the right policy,” he said, adding that the current level of the peso is still manageable.

Dacanay also said the inflation pass-through from the peso’s current level may be limited because many companies had already factored in the possibility of the currency weakening to 61 per dollar last year.

“All the prices that we see right now have already priced in 61…I don’t think there’s a huge inflationary effect, except for those that follow it quite closely, such as fuel and electricity,” he said.