The Philippine peso (PHP) has recently been facing pressures that suggest a potential depreciation against the US dollar (USD). Analysts from ABN Amro forecast a weakening of the PHP due to weaker external balances and what they describe as an overvalued peso, indicating a likely trend of depreciation against the USD heading into 2025.
Recent developments in the geopolitical landscape, including a 17% reciprocal tariff imposed by the US on Philippine goods, heighten concerns about the peso's stability. This trade barrier, coupled with a complicated backdrop of political uncertainty resulting from the arrest of former president Rodrigo Duterte, could further exacerbate the peso's challenges as the country approaches mid-term elections.
Market sentiment regarding the USD appears mixed but leans towards a muted outlook due to a risk-positive environment. The recent U.S. durable goods orders data, showing expected declines of 10.8%, might influence the dollar's performance negatively. However, the USD remains a safe-haven asset that gains traction amid geopolitical uncertainties, and it has proven resilient against fluctuations in emerging markets.
Current PHP to USD exchange rates are at 7-day lows around 0.017498, which is approximately 1.7% below its 3-month average of 0.017792. The rate has traded within a stable range of 3.5%, suggesting limited volatility in the short term. For businesses and individuals engaged in international transactions, these trends indicate potential cost pressures stemming from an anticipated weakening of the peso alongside a complex backdrop of US trade relations.
The outlook for the USD remains dependent on various economic indicators, including inflation trends and Federal Reserve monetary policy. As the most traded currency globally, its influence persists strongly in financial markets, suggesting that market participants should closely monitor developments in both the US and the Philippines for any shifts that may impact the exchange rate.