Volatility in the peso-dollar market will persist as long as no concrete actions are taken to address the political uncertainties that have seeped into the financial markets. This uncertainty will eventually impact the country’s potential for economic growth.

Yes Virginia, our dear local currency will continue to be under attack despite its seeming recovery to the highs of ₱58. This is simply because the long weekend makes currency traders more cautious while other markets in the region remain open.

The peso is expected to slug it out against the greenback due to the confluence of developments in the offshore market—Wednesday’s depreciation of the Japanese yen and the uncertainty in the US-China trade relations—combined with the domestic political condition.

The worst-case scenario is for the peso to break the senior level of ₱60 in the coming weeks before it settles to the highs of ₱58. This slight recovery is expected with the heightened dollar remittances as the holiday season nears.

The latest I’ve heard along the banking corridors is that there has been convergence among floodgate proponents, with some involved pulling out local currency and converting it to dollars through the gray dollar market. This is what has triggered the high demand for greenbacks.

Historical data shared by the Market Mayhem group of certified financial analyst Jonas Ravelas shows that the peso, from the onset of President Bongbong Marcos’ presidency to date, has weakened by only six percent (from ₱55 to ₱58.70). This is attributed to the strong US dollar and the widening current account deficit.

The biggest depreciation occurred during the presidency of President Marcos Sr., at a whopping 438 percent (from ₱3.9 down to ₱21), largely driven by the debt crisis, which saw the country declare a moratorium on its foreign obligations.

The peso slumped further by 73 percent (from ₱26 to ₱45) during the reign of President Fidel V. Ramos, brought about by the 1997 financial crisis. During the time of President Corazon C. Aquino, the peso weakened by 26 percent (to ₱26.50 from ₱21). The political crisis that led to the ouster of President Erap Estrada weakened the peso even more to ₱50.

It was only during the nine-year tenure of President Gloria Macapagal-Arroyo that the peso recovered by eight percent to ₱46, triggered by the implementation of financial reform measures, increased dollar remittances, and fiscal gains.

The peso remained basically stable under the six-year reign of President Noynoy Aquino (from ₱46.5 to ₱47/$) as the country became the favorite destination for Business Process Outsourcing and maintained high dollar reserves.

The stability of the peso, however, was arrested with the economic slowdown arising from the Covid-19 lockdown, depreciating by 17 percent to ₱55.

With the sluggishness of both foreign investors and local consumer confidence, the consensus is for the local currency to remain volatile. This is despite the recommendation of the Independent Commission for Infrastructure (ICI) for the filing of criminal and administrative cases against Senators Jinggoy Estrada and Joel Villanueva, Cong. Zaldy Co, and Department of Public Works and Highways (DPWH) engineers involved in the flood control scandal.

While some market players reacted negatively to the ICI decision—questioning the exclusion of the former Speaker from the list—others, like BDO Capital and Investment Corp. President Ed Francisco, expressed satisfaction, hoping that “something comes out of this.”

For CFA Jonas, it is a first step to a relatively long journey. He states, “the journey of a thousand miles starts with one step. If that would be them as a first salvo, so be it. The key is to start charging and see if their proof of concept of jailing the corrupt holds into conviction. Then if that happens, public trust will slowly return as more of the corrupt get jailed. Slowly but surely.”

Let’s see how this plays out.