The Philippine peso weakened to P61.75 per US dollar on Wednesday, matching its record low initially set in May. This decline of 4.79% year-to-date, from P58.79 on December 29, 2025, reflects the impact of surging oil prices, which have increased more than 20% this month, and the strengthening US dollar. The Bangko Sentral ng Pilipinas (BSP) reportedly sold dollars in the onshore market to intervene and prevent excessive volatility, although BSP Governor Eli M. Remolona, Jr. did not confirm these sales.
The peso's vulnerability is exacerbated by the Philippines' reliance on imported oil, with over 95% of its petroleum requirements sourced internationally. A sustained depreciation could add to inflationary pressures, with estimates suggesting every P1 depreciation increases inflation by approximately 0.03 percentage point. Analysts from BMI, a unit of Fitch Solutions, project the peso could further weaken to between P61 and P63 against the dollar, especially if global oil prices remain elevated or geopolitical tensions escalate.
Despite the central bank's interventions, President Ferdinand Marcos Jr. signaled a pragmatic approach to currency defense, stating that the government would not spend all its foreign reserves to prop up the peso. He acknowledged that there's a limit to what monetary policy alone can achieve against market forces driving the dollar. Palace Press Officer Claire Castro reiterated the BSP's mandate to stabilize the peso and highlighted its sufficient tools, including foreign exchange reserves and policy rates, to manage volatility caused by external factors like the strong dollar and rising oil prices.
The central bank is under pressure to balance supporting economic activity with its primary goal of price stability, as inflation shocks from currency depreciation and potentially higher minimum wages (an P85 increase could add 0.4 percentage points to inflation) could delay the return of inflation to the BSP's target range. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort expects the peso to trade between P61.60 and P61.80, with potential for recovery due to profit-taking. The BSP's foreign reserves have decreased this year to $105 billion, raising questions about the extent of future interventions.
