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Keisha Ta-Asan - The Philippine Star
March 5, 2025 | 12:00am
While a strong dollar driven by a potential return of Trump-era trade policies could pressure global currencies, Standard Chartered economist for Asia Jonathan Koh said the peso is likely to depreciate less compared to other Asian currencies.
Philstar.com / Irra Lising
MANILA, Philippines — The peso is expected to outperform its regional peers despite a stronger dollar, as the country benefits from high interest rates, steady foreign bond inflows and relative insulation from global trade tensions, according to Standard Chartered Bank.
While a strong dollar driven by a potential return of Trump-era trade policies could pressure global currencies, Standard Chartered economist for Asia Jonathan Koh said the peso is likely to depreciate less compared to other Asian currencies.
“By outperformance, it doesn’t mean that the peso will appreciate against the dollar, but it depreciates less than other regional currencies,” Koh said.
“Peso remains a high yielder versus the rest of the region. Interest rates are higher in the Philippines, which has driven a lot of foreign bond inflows into the country,” he said.
Koh also said that foreign portfolio investments have helped cover the Philippines’ current account deficit, which stood at 3.9 percent of gross domestic product in the first nine months of 2024.
Moreover, the Philippines is less vulnerable to trade disruptions compared to its regional peers, given that 75 percent of its economy is driven by domestic activity.
The country also runs a relatively small trade surplus with the United States, making it a less likely target for tariffs, unlike Vietnam, which has seen its trade surplus with the US surge.
“What I’m hearing anecdotally is that a lot of companies from Korea and Taiwan are actually looking at the Philippines as an alternative destination,” Koh said.
“The country also benefits from foreign direct investment (FDI) inflows as firms look for safer options that are less likely to be affected by tariffs,” he added.
Despite the peso’s resilience, Koh acknowledged that FDIs in the Philippines have yet to pick up significantly.
However, he remains optimistic that recent regulatory reforms, including easing restrictions on foreign ownership, could attract more investments as global interest rates stabilize.
Based on central bank data, the net inflow of FDIs retreated by 19.8 percent to a two-month low of $901 million in November last year from $1.12 billion a year ago.
Despite the decline in November, the total FDI level increased by 4.4 percent to $8.58 billion in the January to November period from $8.22 billion in the same period in 2023.
Edward Lee, Standard Chartered’s chief economist and head of FX for ASEAN and South Asia, warned of increasing uncertainty in global markets due to potential policy shifts in the US.
He said that the so-called “Trump trade,” referring to renewed tariff policies, could drive inflation in the US while slowing down growth in China and other export-heavy Asian economies. A stronger dollar is the usual outcome, but tariff delays or shifts in policy could trigger volatility.
The US Federal Reserve’s policy is also a key factor in dollar-peso movements. While aggressive Fed rate cuts could weaken the dollar, a strong US labor market could limit rate reductions, supporting a stronger greenback.
