Expert: Weak peso mirrors eroded trust

The peso’s continued slide against the US dollar reflects eroding investor confidence in the economy, a former Bangko Sentral ng Pilipinas (BSP) official said Wednesday, as President Ferdinand Marcos Jr. sought to allay public concerns by pointing to the country’s healthy gross international reserves (GIR).

Speaking on the sidelines of the 32nd National Correctional Consciousness Week celebration at the New Bilibid Prison in Muntinlupa City, Marcos attributed the peso’s depreciation to rising global oil prices amid the continuing conflict involving the United States and Iran.

He said the country’s foreign reserves could help stabilize the weakening currency.

“Well, first of all, do not take it with alarm. Don’t panic. It is an effect of, really, still the rising price of oil and subsequently the rising prices of fuel and its effect on the economy,” he told reporters.

But former BSP Deputy Governor Diwa Guinigundo said that fundamental factors have weakened the currency.

“When foreigners invest in the Philippines, whether through portfolio investments or direct equity investments in factories and plants, or through the stock market and fixed-income securities, money flows in,” he explained.

“But if investors lose confidence, their money flows out. That is what is happening now. For many months and years, our balance of payments has consistently been negative,” according to the veteran banker.

“Under these circumstances, the peso can be expected to slide or weaken,” he added.

The persistent political noise also raises investors’ concerns about governance and corruption.

“They ask whether we have strong political and economic institutions,” Guinigundo said.

Such concerns undermine confidence, prompting people to convert their pesos to dollars and take the money abroad.

“Several banks have reportedly seen some of their clients buying dollars with pesos, with some of those dollars subsequently taken abroad,” Guinigundo said.

“The conflict in the Middle East continues and global oil prices are high, at more than $104 to $105 per barrel, whether we are talking about West Texas Intermediate or Brent crude,” he said.

Guinigundo noted that speculation about the US Federal Reserve’s next move is another factor.

Inflation is also high in the United States, leading many to expect that the US central bank might raise interest rates.

Peso rebounds a bit

The peso snapped its six-session streak of record lows on Wednesday, strengthening 14.5 centavos, or 0.23 percent, to P64.025 per US dollar from Tuesday’s record low close of P64.17, but the Philippine Stock Exchange Index (PSEi) plunged 107.64 points, or 1.87 percent, to 5,653.55 as oil price pressures and inflation concerns continued to weigh on sentiment.

Despite the recovery, the peso remained above P64 per dollar after hitting a fresh intraday record low of P64.18. Bankers Association of the Philippines data showed the currency opened at P64.08, traded as low as P63.94, and closed at P64.025.

For the Philippines, a major oil importer, more expensive crude increases the dollar cost of fuel purchases and can intensify demand for US currency, adding pressure to the exchange rate.

The country’s external position has also been a concern, with economists citing persistent dollar demand and a widening balance-of-payments deficit as vulnerabilities.

A weaker peso, in turn, raises the local currency cost of fuel and other imports, potentially adding to inflationary pressures.

The currency’s sustained decline despite the BSP’s surprise 50-basis-point rate hike to 5.50 percent on 22 October highlights the strength of external headwinds.

Investors are also watching the US Federal Reserve’s policy outlook, as elevated US interest rates and Treasury yields can support the dollar by making US assets more attractive relative to emerging market investments.

Inflation spikes

As a weak peso against the greenback signals higher inflation, Marcos, when asked about soaring prices as a domino effect of the weak currency, said the government was looking at many ways to resolve the matter.

“Because the inflation is coming from the supply side, it’s supply-side inflation. So monetary measures can only go so far. We have to do others, the other ways. So it’s basically oil, we can do nothing about it. Food, we can, and we are doing, again, everything that we can to make sure that the prices of food come down,” he said.

BSP leans on reserves

Rizal Commercial Banking Corporation chief analyst Michael Ricafort said the Bangko Sentral ng Pilipinas (BSP) has been leaning on the country’s foreign reserves to help the local currency bounce back.

“They (BSP) have been doing that especially since the war in the Middle East started on 28 February. Now at $99.5 billion (foreign reserves), a new three-year low, down from the record high of $113 billion in February 2026 or shortly before the war on Iran/Middle East started,” he said in a Viber message.

To save the plunging peso, Ricafort suggested the government restrict US dollar purchases, as it did at least 10 to 20 years ago.

Trade Secretary Cristina Roque earlier announced that consumers of necessities and prime commodities can expect no price adjustments until the end of the year.

“We assure the public that manufacturers and retailers have guaranteed enough supply for these listed products. There is no need for panic buying or hoarding,” Roque said in a statement.

Roque also assured the public that supplies of essential goods are sufficient to meet household needs nationwide.