Stock - Philippines economy - Peso
Image Credit: Bloomberg

Manila: The Philippine central bank is defining the limit of its tolerance for peso weakness, with the line seen at Php59 per dollar.

The peso dropped to Php59 on Thursday, a record low against the greenback that has now held for more than three weeks. The currency has slumped more than 13% this year.

"With the dollar below its recent highs, it allows the central bank to draw a line in the sand at 59 per dollar for now," said Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. "But a fresh leg up in the dollar can easily lead the peso to breach 60, a key psychological level for the general public."

As the US dollar's unrelenting strength pummels its global peers, traders are focusing on specific levels that might prompt greater central bank intervention.

In Japan, investors are on high alert for further intervention as the yen weakened to just shy of the closely-watched 150-per-dollar level.

'Defend peso'

The peso's weakness has already drawn the attention of President Ferdinand Marcos Jr., who said this week the nation is prepared to defend the currency as its slide this year threatens to fuel inflation. Bangko Sentral ng Pilipinas has repeatedly said it is intervening to curb volatility in the currency, while not defending a specific level.

"We intervene. We won't tell you which days and at what rates," Governor Felipe Medalla told Bloomberg News in a mobile-phone message earlier this week.

Bangko Sentral has drained billions of dollars from the nation's reserves, which have fallen more than 14% this year. The regulator is also monitoring currency transactions for potential speculation, Finance Secretary Benjamin Diokno said last week.

The peso will likely end the first quarter of 2023 at 59.2 per dollar, according to the median forecast in a Bloomberg survey.

"The trend of the peso remains tenuous with downside risks that could emanate from Federal Reserve hikes and dollar strength," said Robert Dan Roces, chief economist at Security Bank Corp. in Manila.