The Bangko Sentral ng Pilipinas (BSP) is likely to intervene in the foreign exchange market to smooth out sharp swings that could add to inflation risks, as the peso remains under sustained pressure.

Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said the BSP's presence in the market will likely focus on maintaining price stability by managing potentially inflationary movements rather than defending a specific exchange-rate level. The approach is consistent with the central bank's inflation-targeting framework, under which the exchange rate floats freely but is monitored for its effect on price expectations.

"While a weaker peso may add to inflation risks, the BSP is unlikely to aggressively intervene simply because USD/PHP (US dollar/Philippine peso) is approaching P63," he said in a Viber message. "The BSP intervention, if any, is usually aimed at smoothing excessive volatility rather than defending a particular peso level."

On Wednesday, the peso closed at a new all-time low for a fourth consecutive session, sinking to P62.565 per dollar. It also logged a record intraday low of P62.69. The currency rebounded slightly on Thursday, finishing at P62.52, up 4.5 centavos.

Ravelas said the peso's latest slide came as renewed tensions in the Middle East pushed up global oil prices, fanning inflation concerns anew.

"The recent peso weakness is largely driven by global factors: safe-haven flows into the US dollar amid heightened geopolitical tensions, supply-chain concerns linked to Middle East developments, and weather-related disruptions affecting commodity prices and trade flows," he said.

He added that the BSP will likely allow the peso's movements to remain market-driven as long as they stay orderly and inflation expectations remain anchored.

"The BSP watches inflation first, the exchange rate second. Expect intervention to calm volatility, not to draw a line at P63."

Philippine headline inflation averaged 5% as of July. The central bank expects the consumer price index to average 6.1% this year. It said inflation could still peak in the final quarter as food inflation may run hot due to potential supply disruptions from the "Super El Niño" episode.

BSP Governor Eli M. Remolona, Jr. has said the central bank maintains a presence in the market to smooth sharp movements, noting that trying to defend the currency against a strong dollar is futile because it would only deplete foreign exchange reserves.

The country's gross international reserves fell to an 18-month low of $103.317 billion as of July.

Luis A. Limlingan, head of sales at Regina Capital Development Corp., said the central bank could face a dilemma if the peso slides to the P63 level, as this would heighten imported inflation risks.

"The psychological threshold of P63:$1 serves as a major technical resistance level where the BSP may step in with measured interventions or monetary tightening to curb excess volatility," Limlingan said in a Viber message.

"While the initial drop past P62.50 reflects a knee-jerk shift into safe-haven US dollar assets triggered by geopolitical tensions, persistent pressure could linger as long as elevated global crude prices and high US yields remain intact," he added.

This could stoke domestic inflation, as the Philippines—being a net importer—is highly sensitive to global energy price movements.

"As a net energy-importing country, every 10% sustained depreciation of the local currency supposedly adds approximately 0.3 to 0.5 percentage points to headline inflation through second-round import and transport costs," he said.

Still, Limlingan noted that remittances and seasonal dollar inflows toward the end of the year should help temper the peso's decline. Remittances from millions of overseas Filipino workers are a structural source of dollar supply for the economy, which is why they are watched as a counterweight to peso pressure in the run-up to the year-end holidays. — Aaron Michael C. Sy