‘Peso within reach of 65 to $1 level’

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October 29, 2026 | 12:00am

As economic risks mount

MANILA, Philippines —  The peso could weaken further toward 65 per dollar as persistent external pressures collide with weak domestic growth and elevated inflation, with former central bank governor Jose Cuisia Jr. saying the level is now increasingly within reach.

Cuisia said he would have considered 65 unlikely as recently as two weeks ago, but the peso’s rapid depreciation has changed the outlook after the currency breached 64 this week.

“Now it’s likely, although I’m not saying it will (reach 65), but we’re very close to it,” Cuisia said. “It’s very easy to break 65.”

The peso breached the 64-per-dollar level on Tuesday. It took only 12 days for the local currency to move from its first close above 63 to a breach of 64.

Yesterday, the peso appreciated to 64.025 to $1, bouncing back from Tuesday’s record low of 64.17 to $1.

Cuisia attributed the peso’s weakness to several factors, including a strong dollar, expectations of higher interest rates in the United States, the Philippines’ large trade and fiscal deficits, declining foreign investment and weaker dollar inflows.

He said the Bangko Sentral ng Pilipinas (BSP) should continue allowing market forces to determine the exchange rate while intervening only to smooth excessive volatility.

Cuisia acknowledged the difficulty of managing the currency under the current environment, saying he would not want to be in BSP Governor Eli Remolona Jr.’s position as the central bank tries to balance peso stability, inflation and the country’s limited foreign exchange reserves.

The BSP, Cuisia said, could not simply exhaust its reserves defending a particular exchange rate level, especially as dollars are also needed to cover imports and external debt payments.

“I wouldn’t want to be in the shoes of Governor Remolona,” Cuisia said.

China Banking Corp. chief economist Domini Velasquez likewise said the 65-per-dollar level is “not out of reach,” although seasonal dollar inflows from remittances and business process outsourcing bonus payments could provide some relief toward year-end.

She warned, however, that the peso remains vulnerable if geopolitical tensions persist or the US Federal Reserve turns more hawkish.

Further depreciation could also add to inflation pressures through higher oil costs and potentially larger food imports if El Niño constrains domestic supply.

The latest forecasts of Bank of the Philippine Islands (BPI) similarly show the peso ending 2026 at 64.60 per dollar under its baseline scenario, while a pessimistic case places the currency at 66.40.

BPI lead economist Jun Neri said the downside scenario assumes persistently high oil prices, a prolonged severe El Niño and continued national government underspending.

Nicholas Mapa, chief economist at Metropolitan Bank & Trust Co., said the peso’s continued weakness despite the BSP’s surprise 50-basis-point rate hike suggests markets are increasingly focused on deteriorating growth prospects.

Mapa warned that further monetary tightening may have limited impact on inflation if price pressures remain supply-driven, while higher borrowing costs could further weaken economic activity and extend what he described as a “slowflation” environment.

SM Investments Corp. group economist Robert Dan Roces said the bigger issue is not whether the peso crosses a particular level, but whether prolonged depreciation feeds further into inflation, erodes household purchasing power and weighs on economic growth.