Philippine Peso: Under pressure from Oil surge – BNY

BNY’s Geoff Yu highlights that the Philippine central bank has intervened as higher Oil prices pressure Asian importers. Reported US Dollar (USD) sales followed the Peso’s drop to a record low near 61.75, with reserves already down more than 5% this year. iFlow data show Philippine Peso (PHP) holdings close to year-to-date lows, underscoring rising vulnerability and the need for vigilant policy.

Oil shock drives FX defense

"The Philippine and Indian central banks have both intervened to support their currencies as surging oil prices put renewed pressure on Asian oil importers. In the Philippines, the central bank reportedly sold dollars after the peso fell to a record low of 61.75 to the dollar, with higher oil prices threatening to widen the current account deficit and add to inflation pressure."

"Our flow data confirm that pressure is building. Sales have already pushed PHP holdings close to their lowest level YTD. The currency does not have the carry anchor seen elsewhere, which may require much greater BSP vigilance on interest rates, despite the obvious dampening impact on growth."

"Asia’s oil-importing currencies are already absorbing the shock. Japan remains at the verbal intervention stage, while the Philippines and India have moved into reported dollar selling to lean against FX weakness. This is not intervention from strength, but an attempt to slow the passthrough from higher oil into currencies, inflation and confidence."