Peso may slide as markets price in policies of Trump

By Maria Luisa Jacinta C. Jocson, Reporter

THE PHILIPPINE peso may slide to the P59-a-dollar level this week as markets price in US President-elect Donald J. Trump’s economic policies and amid safe-haven demand for the dollar due to geopolitical tensions.

“The US dollar/peso exchange rate went up as the markets priced in a possible reduction in Fed rate cuts amid possible Trump protectionist policies that could lead to a pickup in US inflation,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

The peso closed at P58.87 a dollar on Friday, strengthening by 13 centavos from its record-low P59 finish on Thursday, according to Bankers Association of the Philippines data posted on its website. Week on week, it weakened by 13.8 centavos.

Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said the peso depreciation was due to the strength of the dollar amid the rise in US Treasury yields after Donald J. Trump’s election win.

President-elect Trump’s choice of Scott Bessent for Treasury secretary could lift some of the gloom that has pervaded the sagging US government bond market in recent weeks, Reuters reported, citing investors.

Mr. Trump on Friday said he had chosen Mr. Bessent, a prominent investor, as Treasury secretary, a key cabinet position with vast influence over economic, regulatory and international affairs.

The selection comes after days of speculation that weighed on Treasury markets already dogged by worries over a potential rebound in inflation and increase in the federal budget deficit from Mr. Trump’s economic plans such as tax cuts and import tariffs.

The benchmark 10-year US yield, which moves inversely to bond prices, is hovering near a five-month high after a weeks-long selloff in Treasuries. Uncertainty over who would fill the Treasury role added to the sell-off in recent days, investors said.

“The recent depreciation of the peso against the dollar is about a strong US dollar story due to the rising geopolitical tensions,” the BSP said in a statement on Friday. “The peso traded in line with the regional currencies we benchmark against.”

Ukraine has lost over 40% of the territory in Russia’s Kursk region that it seized in a surprise incursion in August as Russian forces mounted waves of counterassaults, Reuters reported, citing a senior Ukrainian military source.

The source, who is on Ukraine’s General Staff, said Russia had deployed 59,000 troops to the Kursk region since Kyiv’s forces swept in and advanced swiftly, catching Moscow unprepared two-and-a-half years into its full-scale invasion of Ukraine.

Mr. Ravelas said the peso could sink back to the P59-a-dollar level due to signals of a rate cut by the BSP and delays to the Fed’s own easing cycle.

BSP Governor Eli M. Remolona, Jr. last week said the Monetary Board could either keep or cut rates at its Dec. 19 policy meeting.

Inflationary pressures would warrant a pause, while weaker-than-expected growth would pave the way for another rate cut, he said.

The BSP has lowered borrowing costs by 50 basis-points (bps) since it started cutting rates in August.

A trader said by phone that markets are anticipating further signals on the Fed’s December policy review.

The US Federal Reserve will trim interest rates next month but make shallower cuts in 2025 than expected just a month ago due to the risk of higher inflation from President-elect Donald Trump’s proposed policies, according to most economists in a Reuters poll.

Prospects for a price resurgence based on his planned policies, including higher tariffs and tax reductions, led markets to nearly halve rate cut pricing to around 75 bps by end-2025 over the past few weeks.

The trader expects the peso to trade at P58.50 to P59 a dollar this week, while Mr. Ricafort sees it at P58.60 to P59. Mr. Ravelas expects the peso to trade at P58.70 to P59.