‘DON’T PANIC’: Marcos promises peso defense as experts raise red flags

National

HOW far can the government go to defend the peso?

As President Marcos vowed to use available tools to support the currency, economists warned that intervention must be weighed against dwindling reserves and the need to preserve the central bank’s independence.

The peso recovered 14.5 centavos to close at P64.025 against the US dollar on Wednesday, ending a seven-session streak of record-low closing levels.

Marcos urged the public not to panic, attributing the currency’s weakness to rising global oil prices and their effects on fuel costs and the economy.

“Do not take it with alarm. Don’t panic. It is an effect of […] the rising prices of oil, and subsequently the rising prices of fuel, and its effect on the economy,” Marcos said in an Inquirer report.

He assured Filipinos that the government would continue defending the peso using available resources, including foreign exchange reserves. However, he acknowledged that monetary measures alone would not suffice, pointing to efforts to control food inflation as another way to ease economic pressures.

Former Central Bank of the Philippines governor Jose Cuisia Jr. said the Bangko Sentral ng Pilipinas (BSP) was taking an appropriate approach to managing the peso’s weakness but cautioned that continued intervention could further deplete the country’s foreign exchange reserves.

Gross international reserves fell to a three-year low of $99.99 billion in September, partly due to the BSP’s market interventions, although they remained above internationally accepted adequacy thresholds.

Cuisia said the central bank must preserve enough reserves to sustain its capacity to respond to market pressures.

BSP Governor Eli Remolona Jr. has said the central bank does not target a specific peso-dollar exchange rate, intervening instead to curb excessive volatility that could fuel inflation.

The peso’s depreciation has been linked to war-driven oil price increases, stronger demand for dollars and uncertainty over the domestic economic outlook.

Expectations of another US Federal Reserve rate hike have also strengthened the dollar.

After the BSP raised its benchmark interest rate by 50 basis points to 5.5 percent last week, Cuisia said the peso could weaken further to P65 per dollar if the Fed also raised rates, underscoring the influence of US monetary policy on the local currency.

Ser Percival Peña-Reyes of the Ateneo Center for Economic Research and Development warned that aggressively defending a specific exchange-rate level could prove costly, particularly if external market pressures persist. However, he said the BSP should remain prepared to intervene decisively if trading becomes disorderly, helping deter speculation without committing the central bank to an expensive and potentially unsustainable effort to counter broader market forces.

Peña-Reyes also warned that Marcos’ statements could pressure the BSP to intervene more aggressively, stressing that decisions must remain independent of political influence.

Meanwhile, Bagong Alyansang Makabayan president Renato Reyes Jr. criticized Marcos’ call for calm, saying it overlooked the hardships caused by rising prices and interest rates.

“‘Don’t panic’ is a privileged statement from someone who does not have to deal with rising prices and high interest rates,” Reyes said in the same article.(MyTVCebu)