Philippine Peso Lags Asian Currencies as Energy Shock Drains Reserves

The Philippine peso has been under sustained pressure, falling 6% this year and making it the region's worst-performing currency. According to Sina Finance, the peso's weakness has been driven by a wider trade deficit, higher inflation, and rapidly declining foreign exchange reserves as oil import costs surged. The peso fell in a quarter when all other Asian emerging-market currencies rose against the U.S. dollar. It closed last Friday at 62.59 per dollar, near its record low of 62.69. According to Sina Finance, Manila's trade deficit widened about 29% to $37 billion in the first seven months of this year, while foreign exchange reserves fell about 9% from a February record to $103 billion. President Ferdinand Marcos Jr. and central bank Governor Eli Remolona had both said using reserves to defend the peso would be futile. JPMorgan and Bank of America strategists expect the peso's decline to continue, with the currency potentially weakening to 65 per dollar by mid-2026. China Banking Corp. chief economist Domini Velasquez said the peso's weakness reflects structural balance-of-payments deficits, safe-haven demand for the dollar, weak domestic sentiment, and expectations of further depreciation. Remolona told senators at a hearing last month that any attempt to push the peso back to 60 could exhaust the country's foreign exchange reserves and dollars. He said the central bank would focus on managing sharp exchange-rate swings. Diwa Guinigundo, former deputy governor of the Philippine central bank's monetary and economic sector and now chief adviser at GlobalSource Partners, said such candor could encourage more speculation because traders know the central bank will not bet heavily on dwindling reserves. India and Indonesia, by contrast, have been able to defend their currencies more forcefully with much larger reserves.