The peso’s weakness and volatility could persist if economic and political uncertainties that make investors uneasy linger, according to a former Bangko Sentral ng Pilipinas (BSP) official.

This was the assessment of former BSP deputy governor Diwa C. Guinigundo despite the local currency’s 44-centavo rebound on Wednesday, Oct. 29, closing at ₱58.69 against the United States (US) dollar from the record low of ₱59.13 last Tuesday, Oct. 28. (See related News in Brief story)

While the Philippine peso is unlikely the most volatile currency in the region, “unless the fundamental and uncertainty factors are addressed, [its] volatility may likely continue, Guinigundo, who is now the Philippines analyst at New York-based macroeconomic and geopolitical research and analysis firm GlobalSource Partners, told Manila Bulletin on Oct. 29.

Interpreting for Manila Bulletin a Philippine peso GARCH volatility analysis from the V-Lab website of New York University’s (NYU) Stern School of Business, Guinigundo noted that “the prediction of stronger volatility extends to one year.”

In terms of currency volatility, or the magnitude of fluctuation against the US dollar, data provided by Guinigundo showed that from January to September 2025, the peso’s 0.8671 percent remained lower than last year’s 1.1045 percent.

Citing BSP data, Guinigundo pointed out that the peso’s volatility stood at 1.1387 percent for the entire 2024; 0.7906 percent in 2023; and 2.6219 percent in 2022. “Recall that it was in 2022 that the peso touched the ₱60 intraday [low level],” he noted.

Based on BSP data, the peso depreciated by 2.9 percent last year, weakened by 2.07 percent in 2023, and dropped by 9.59 percent versus the greenback in 2022, reversing the 0.75-percent appreciation in 2021.

“The peso has been volatile because of certain fundamentals: trade and current account balances continue to be in big deficits; overseas Filipino workers’ (OFWs) remittances, while positively growing, remain modest; and foreign investments—both direct (FDIs) and portfolio—are weak,” Guinigundo explained.

“The market is also worried about the national government’s (NG) fast-growing and already massive debt of ₱17.468 trillion as of end-August 2025; total foreign debt of $148.873 billion against the country’s foreign exchange (forex) reserves of $108.028 billion; and the sustained large fiscal deficit, which stood at ₱1.117 trillion for the first nine months of 2025 against ₱970 billion a year ago. The market is also worried that capital formation has been slowing down, driving economic growth this year below the 5.5-percent lower end of the government’s target,” he added.

“Add to that the uncertainty over the country’s governance—that elected and appointed public officials can bleed the country dry through plunder of the national budget via ghost, unfinished, and substandard infrastructure projects,” Guinigundo said, referring to the massive flood control scandal.

“When there is uncertainty in both the economic and political prospects of the country, this is easily reflected in the peso–US dollar rate. This is what is behind the peso’s recent weakness,” he pointed out.

Also, “if the market believes the BSP will continue to be accommodative, that could also likely add more pressure to the peso’s weakness and volatility,” Guinigundo added, referring to the ongoing monetary easing, or lowering of key interest rates, by the central bank.

Meanwhile, foreign banking giants reported that the Philippine peso emerged as one of the weakest performers among Asian currencies after falling to its historic low on Oct. 28, adding that the peso’s weakness fared worse than expected.

Singapore-based United Overseas Bank (UOB) reported in an Oct. 29 commentary that the peso, alongside the Indian rupee and South Korean won, was among the weakest performers against the US dollar on Oct. 28.

Meanwhile, the Thai baht, Malaysian ringgit, and New Taiwan dollar were the best performers in the region.

This followed the BSP’s statement that the central bank would not immediately intervene in forex fluctuations.

“While we had already been anticipating some headwinds to the Philippine peso from a more dovish BSP, coupled with the corruption issues arising from flood control projects, the move in the peso has admittedly been weaker than we anticipated,” Japanese financial giant MUFG Bank Ltd. said in an Oct. 29 commentary.

Michael Wan, senior currency analyst at MUFG Global Markets Research, said the bank anticipates this losing streak to be offset by “lower” inflation, “strong private investment including in renewable energy (RE) projects, an expected pick-up in FDIs from the past surge in FDI approvals, coupled with seasonal inflows from remittances.”

However, Wan noted that these countervailing forces have yet to make an impact on the forex direction.

“While we will relook at our exact forecasts with our global team... we are not entirely comfortable abandoning our view for the US dollar-peso to move lower directionally, especially after the recent weakness,” Wan said.

It can be recalled that the BSP said it will only participate in the market if the peso drops sharply enough to risk stoking inflation.

Additionally, the central bank assured that “resilient” remittance inflows, coupled with relatively fast economic expansion and ongoing reforms, continue to anchor the local currency.

As for the country’s gross international reserves (GIR), or US dollar stock, the BSP said they remain “robust,” standing at $108.8 billion as of September. This was the highest level since October 2024, driven by record-high gold reserves and the central bank’s investment income.