The Philippine peso, Indian rupee and Indonesian rupiah will remain vulnerable to foreign exchange fluctuations as domestic growth narratives struggle to compete with a strong US dollar, according to an analysis by Oxford Economics.
The research firm noted that regional currencies backed by policy credibility and strong external buffers, such as the Singapore dollar and Malaysian ringgit, are better positioned to outperform.
It said current-account deficit economies like the Philippines face ongoing pressure from weak investment and governance-related disruptions that continue to weigh on currency performance.
Even in a scenario where the US dollar weakens, Oxford Economics expects limited scope for durable rallies among these vulnerable currencies.
It said that in the Philippines, specific headwinds linked to external trade policy uncertainty are extending the currency weakness observed throughout the previous year.
The peso hit a record low of 59.35 against the US dollar on Jan. 7, 2025, surpassing the previous low of P59.22 set on Dec. 9.
Despite the volatility, the Bangko Sentral ng Pilipinas (BSP) has maintained a hands-off approach to the foreign exchange market.
BSP Governor Eli Remolona Jr. told reporters at a Rotary Club event that the central bank has resisted “tremendous pressure” to defend the currency. Remolona said the country’s underlying economic fundamentals do not currently warrant direct intervention.
He said that while some neighboring countries purposely weaken their currencies to support export-led manufacturing, the Philippines no longer maintains the significant manufacturing base required to benefit from such a strategy in the same way.
The current stance of the BSP suggests it would continue to allow market forces to determine the value of the peso unless extreme volatility begins to threaten broader economic stability.
In other parts of the region, Oxford Economics warned that Indonesia faces depreciation risks due to policy easing and a widening current-account deficit, while India faces constraints from tariff uncertainty.
