Peso plunges to record-low 61.64 vs. US dollar as political turmoil deepens, oil surges

Earlier, Singapore-based Oversea-Chinese Banking Corp. Ltd. (OCBC) flagged that the peso is at risk of plunging to a new historic low as volatile combination of global energy shocks and intensifying domestic political turmoil erodes investor confidence.

In a May 13 report, OCBC foreign exchange (FX) strategist Christopher Wong warned that the local currency remains vulnerable to fresh weakness, with the US dollar-peso pair holding above ₱61:$1.

Wong said that the “unfavorable oil-rates-risk mix” is stretching the US dollar’s resilience.

Prior to Thursday, the peso hit a previous record low of ₱61.567 last April 29, breaching the psychological ₱61:$1 level despite a hawkish intervention by the Bangko Sentral ng Pilipinas (BSP). The central bank raised its key borrowing rate by 25 basis points (bps) to 4.5 percent in late April to anchor inflation expectations, yet global pressures have largely offset the move.

Wong noted that Asian currencies are facing a triple threat from elevated US Treasury yields, high oil prices, and a general shift toward risk aversion.

Energy-sensitive currencies like the Indian rupee, the Indonesian rupiah, and the peso are among the most exposed. In the Philippines, surging energy costs drove headline inflation to a three-year high of 7.2 percent in April, significantly above the central bank’s target range.

“Higher oil prices are hurting the Philippines through import demand, inflation, and the current account channel,” Wong said.

He added that the combination of weak first-quarter economic growth and the 7.2-percent inflation print leaves the BSP facing an “uncomfortable inflation-growth trade-off.”

Beyond economic fundamentals, a deteriorating political climate is weighing on the market. The domestic political landscape has shifted into a period of high uncertainty following the House of Representatives’ vote to impeach Vice President Sara Duterte.

The move has been exacerbated by a sudden leadership shakeup in the Senate and a standoff involving Senator Ronald “Bato” dela Rosa, who recently resurfaced at the Senate amid reports of an International Criminal Court (ICC) arrest warrant.

“Political noise may also be adding a layer of caution at a time when oil, rates and risk-off dynamics are already unfavorable,” Wong said.

Technical data monitored by the Singaporean lender suggested that the brief “mild bearish momentum” for the dollar-peso pair is fading, indicating the peso’s recent attempts to stabilize against the greenback are unlikely to last.

Wong described near-term risks as skewed to the upside for the dollar, implying the peso is poised to slip further in the coming days.

According to a trader, the local currency is “no longer reacting to just a strong dollar and high US rates.”

“Today’s move suggests markets are also pricing in a higher political and uncertainty premium, especially as the peso underperformed regional peers,” the trader told Manila Bulletin on Thursday.

Looking ahead, the trader sees foreign exchange (forex) rate swings to remain elevated, warning that the peso could slump to another record low of ₱62:$1 “if risk sentiment deteriorates further.”

However, a caveat followed, saying the BSP “still has enough credibility and reserves to prevent disorderly swings.”

— Derco Rosal