The Philippine peso weakened against the US dollar, closing at P61.815 from P61.785 the previous day, marking its lowest close in over three weeks. The currency reached a new intraday record low of P61.995, surpassing its previous low of P61.85 set on July 24. This depreciation means the peso has lost P2.995 or 4.85% year-to-date from its P58.79 finish on December 29, 2025. The weakening was largely attributed to escalating tensions in the Middle East, which heightened inflation and interest rate concerns, and increased demand for safe-haven assets.
Factors contributing to the peso's decline include renewed market concerns after the 60-day Memorandum of Understanding between the US and Iran expired, leading to a surge in oil prices and broad US dollar strength. As the Philippines imports 98% of its oil from the Middle East, higher energy costs increase demand for dollars, thus weighing on the currency. The US dollar also strengthened ahead of the release of the US Federal Reserve's last policy meeting minutes.
Analysts and traders suggest the Bangko Sentral ng Pilipinas (BSP) could intervene if the peso hits the P62 per dollar level, although some believe intervention would be aimed at smoothing excessive volatility rather than defending a specific exchange rate. The peso's sharp decline, which adds to inflationary pressure through higher import costs, could prompt the BSP to increase borrowing costs for a third time this year. A 25-basis point rate hike is seen as a potential defense against the dollar's strength. The Monetary Board has already raised rates by 50 basis points through two consecutive 25-basis point hikes in April and June, bringing the policy rate to 4.75%. Its next policy review is scheduled for August 27.
The volume of dollars exchanged rose significantly to $1.888 billion from $1.336 billion previously, indicating increased market activity. Traders anticipate the peso to move between P61.65 and P61.90 against the dollar on Thursday, with another estimate ranging from P61.75 to P61.95. The central bank has previously intervened in foreign exchange markets to support the currency, and its foreign exchange reserves have fallen nearly 7% this year to $103 billion.
