(Bloomberg) -- The Philippine peso may again hit its record low of 59 against the dollar “over time” if geopolitical worries and risks related to the US election don’t dissipate, according to central bank Governor Eli Remolona Jr.
“If the uncertainty, if the risks persists” then “59 is possible but I don’t know if it’s likely,” the Bangko Sentral ng Pilipinas chief said Friday in an interview on the sidelines of the International Monetary Fund and World Bank annual meetings in Washington.
Emerging-market currencies including the peso are again under pressure as the dollar strengthens on prospects of slower Federal Reserve easing and political risks from the tight US presidential race. The Philippine currency has slumped to an almost three-month low, dropping nearly 4% this month against the greenback to close at 58.32 on Friday.
The recent bout of peso weakness isn’t a cause for concern for the BSP nor is it prompting Remolona to reconsider the easing path he has drawn through next year, after two quarter-point rate cuts since August. The governor, who kicked off an easing cycle ahead of the Fed, had repeatedly said that factors other than the US key rate and peso moves typically carry more weight in rate decisions.
The BSP remains on course to gradually reduce its benchmark interest rate to 4.5% by the end of 2025 from the current 6%, with another quarter-point cut in the cards at the December meeting, according to the governor.
Read: Inflation Surprise Backs Philippine Central Banker’s Easing Plan
“We worry about the peso moving too sharply,” he said when asked whether he’s concerned about the currency hitting its record low again. “The worry about the peso comes from the worry about the pass through,” Remolona said, as depreciation tends to spur inflation, especially when the movement is sharp.
The central bank hasn’t been intervening in the market, Remolona said.
Still, the governor said that now, there’s “more uncertainty, the market is seeing more risks but it’s a global kind of risk” that’s triggering a flight to the dollar “even when the risk is coming from the US.”
Persistent risks post the US election, including a possible interference with the Fed under a Donald Trump win will only spur more funds into the dollar, according to the BSP chief. The dollar has “become even more of a safe haven currency than before,” he said.
--With assistance from Andreo Calonzo and Ditas Lopez.
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