The Philippine peso (PHP) is currently experiencing a period of relative stability, with the exchange rate to the US dollar (USD/PHP) at 0.017707. This figure is only 0.5% below its three-month average of 0.017799, reflecting a trading range of 3.5% over the past few months. Analysts suggest that despite its present stability, the overvaluation of the peso and weaker external balances indicate potential depreciation against the USD in the longer term, particularly as forecasters from ABN Amro project a decline in 2025.
The recently imposed 17% reciprocal tariff on Philippine goods by the US, part of the escalating trade tensions under former President Trump's administration, is likely to exert further pressure on the PHP. Although the impacts of these tariffs have yet to be fully realized, they contribute to an increasingly cautious outlook for the currency, especially as the economic environment tightens.
In regards to the European and British currencies, the PHP is seeing some short-term gains. The exchange rate to the euro (PHP to EUR) has reached a seven-day high at 0.015104, albeit still 3.1% below its three-month average. The GBP sees a similar trend, with the PHP at a 14-day high near 0.013034, just 1.7% below its three-month average. However, both currencies have traded within stable ranges, suggesting a lack of significant volatility.
Moreover, the political landscape in the Philippines could introduce additional uncertainties. The arrest of former president Rodrigo Duterte for alleged human rights violations may have implications for the upcoming mid-term elections, raising concerns over potential shifts in domestic policy. While mid-term elections traditionally result in modest changes, heightened political tension could affect investor sentiment and, consequently, the strength of the PHP.
As emerging Asian currencies face deteriorating outlooks, particularly following Trump's new tariffs on China, the Philippines has not capitalized on supply chain diversification as seen in other countries. This situation further complicates the peso's position within a challenging regional context. Therefore, stakeholders in the currency market should remain vigilant, as these developments could influence future trends in the PHP exchange rate.
