The Bangko Sentral ng Pilipinas (BSP) has been active in the foreign exchange market, intervening "in small amounts" to temper the volatility of the peso, which has been weakening against the strong US dollar. Governor Eli Remolona Jr. stated that significant intervention would only occur "when there's stress" and that the current movement of the peso isn't considered stressed, as many other currencies have also depreciated. The BSP's primary goal with these interventions is to curb volatility and prevent inflationary pressures, not to defend a particular peso rate.
Previously, the BSP had sold dollars from its reserves to support the peso when it reached the critical P57-level. A volatile peso can lead to increased import costs and fuel inflation. Analysts like Michael Wan of MUFG Bank anticipate the BSP might intervene more strongly if the peso depreciates past the P59-level, with a potential test of the P60-level.
More recently, the peso dropped as much as 0.5% through P59 per dollar, a level that had held firm since 2022. On one occasion, the peso touched P61.75 against the US dollar, matching a record low. Bloomberg also reported that the Philippine central bank intervened on a Wednesday by selling dollars in the onshore market, with dollar exchanges surging to $1.269 billion that day from $752.5 million the prior day. Despite these interventions, the BSP emphasizes that it allows the exchange rate to be determined by market forces and intervenes mainly to dampen inflationary swings over time.
Governor Remolona has indicated a new strategy involving more forceful intervention during periods of extended peso weakness, moving away from day-to-day intervention. He noted that the BSP intervenes when the peso's swing becomes inflationary to slow down that trend, rather than to manage capital flows. Based on estimates, every P1 depreciation of the peso could add around 0.03 percentage point to inflation, reflecting that approximately 15% of the CPI basket is imported.
While the BSP tolerates some currency weakness and avoids setting specific targets, it remains vigilant against sustained depreciation that could lead to inflationary pressures. Governor Remolona mentioned a risk of the local currency dropping again to the record low of P59 per dollar, given the peso's volatility. Policymakers are also considering two more quarter-point cuts in the key interest rate this year, with further easing possible in 2026, assuming controlled inflation.
