Peso poised for deeper drop as Marcos eyes presidency

The Philippines peso is in danger of extending this year’s decline as uncertainty over the policies of the front-runner in Monday’s presidential election adds to economic headwinds.

While Ferdinand “Bongbong” Marcos Jr. is favored by 56% of respondents in a survey conducted from April 16 – 21 by pollster Pulse Asia Research Inc., he scored the second lowest in a Bloomberg poll of investors.

“There is more uncertainty as to where Marcos Jr. stands on key policy issues,” said Euben Paracuelles, chief Asean economist at Nomura Holdings Inc. in Singapore. “His campaign has not said much and he has not attended presidential debates.”

The peso has already fallen about 2.9% against the greenback this year as the central bank mulls when to lift its policy rate from a record low while peers including the Federal Reserve increase the pace of monetary tightening. The nation’s trade deficit has added to downward pressure on the currency and global investors have increased sales of Philippines stocks over the past week.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno, who said on Thursday that supply disruptions warrant closer scrutiny, won’t meet with his board to decide on interest rates until May 19. He’s previously said the central bank may consider a rate increase in June.

In contrast, the Federal Reserve has just raised rates by half a percentage point and flagged that more of the same is coming over the next few months.

Still, with inflation running at 4.9% versus the BSP’s 2-4% target, Diokno could pivot to an earlier hike, which would support the peso. Marcos Jr. could also offer more information on his economic policies if elected, potentially helping the currency.

The late dictator’s son has pledged to focus on small businesses, agriculture, infrastructure and tourism to help the economy recover from the pandemic.

Vice President Leni Robredo, who was his nearest rival in the Pulse Asia survey at 23%, was the top pick to oversee the economy in the Bloomberg poll of investors.

For now though, the peso is vulnerable after cracking initial support last week at 52.495.

“A breach of 53.0 cannot be ruled out, given the ongoing strength of the dollar as the market continues to price in more aggressive tightening by the Fed,” said Irene Cheung, a strategist at Australia & New Zealand Banking Group Ltd. in Singapore.