The peso remains relatively stable for the fourth straight week at below the 59 per dollar level after President Ferdinand Marcos Jr. signaled that the government may have to defend the peso in the coming months.

The falling yen, however, hit 150 per dollar for the first time since 1990 on Thursday, driven down by the contrast between Japanese monetary easing and aggressive US interest rate hikes.

The currency has plunged from February levels of around 115 as the Bank of Japan sticks to its longstanding ultra-loose policies, designed to encourage sustainable growth in the world's third-largest economy.

At the same time the US Federal Reserve has sharply increased borrowing costs to quell sky-high inflation fueled by factors including the war in Ukraine.

"The government's priority is to use interest rates to ease inflation; thus, this measure could help stabilize the peso exchange rate and overall inflation, consistent with earlier signals from the Economic Team," Michael Ricafort, chief economist with the Rizal Commercial Banking Corp. said over the weekend.

The economist's peso outlook said recent policy signals include tighter restrictions in the reporting of banks' foreign exchange transactions (in terms of additional supporting documents, increased frequency of reports, among others); increased activity by local authorities in the local forex market to curb excess in the volatility of the peso and stabilize the local currency; plans to increase the Bangko Sentral ng Pilipinas' debt issuance to reduce supply of pesos that could be used to purchase dollars in the market; continued servicing of legitimate forex transactions; and other signals to discourage undue speculation on the peso.

Moreover, Ricafort said the peso exchange rate is stronger against the dollar for the week after the continued year-on-year growth in OFW remittances and the continued increase in foreign tourist arrivals to 1.67 million posted in early October from February when the country reopened its border, both of which contribute to more dollar revenue/inflows into the country.

BOP deficit widens

"The latest balance of payments deficit which was at its widest in four years and gross international reserves declining to new two-year lows (since May 2020) at $93 billion, which is equivalent to 7.4 months of imports or about twice the acceptable minimum international standard of three to four months," he added.

However, for net importing countries (e.g. the Philippines and India), weaker local currencies would tend to increase the import costs/prices and overall inflation, Ricafort said.

The Japanese unit sank to as low as 150.08 per dollar, before easing back soon after.

Analysts say the yen will continue to slide as long as the two policies differ, with more dramatic Fed interest-rate hikes likely as US prices Finance Minister Shunichi Suzuki called volatile fluctuations in forex markets "absolutely intolerable" on Thursday, reiterating verbal warnings that authorities will take an "appropriate response" to promote stability.