The Philippine peso has depreciated significantly against the US dollar, closing at P61.815 on Wednesday and reaching an intraday record low of P61.995. This marks a 4.85% depreciation year-to-date from its P58.79 close on December 29, 2025. The currency's weakening is largely attributed to externally driven factors, including increased oil prices, escalating geopolitical tensions in the Middle East following the expiration of a 60-day US-Iran memorandum of understanding, and broad US dollar strength. The Philippines, being a net oil and gas importer with 98% of its oil from the Middle East, is particularly vulnerable to rising energy costs, which increase demand for dollars.
Market concerns were further fueled by the expiration of the truce between the US and Iran, pushing the peso close to the P62:$1 threshold. Volume in the local foreign-exchange market surged to $1.888 billion from $1.336 billion previously, indicating increased dollar demand. Analysts like Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion and Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas have highlighted the impact of renewed Middle East uncertainty on global crude prices and the peso's vulnerability as an oil importer.
The Bangko Sentral ng Pilipinas (BSP) is closely monitoring the situation. While BSP Governor Eli M. Remolona, Jr. has stated the central bank intervenes to smooth excessive volatility rather than defend a specific exchange rate level, the peso's sharp decline could prompt the BSP to increase borrowing costs. Analysts are suggesting a potential 25-basis-point rate hike at the upcoming August 27 policy meeting to counter inflationary pressures from a weaker peso and provide a "good defense" against the dollar. The BSP previously raised rates by 50 basis points through two 25-basis-point hikes in April and June, bringing the policy rate to 4.75%.
Further depreciation was noted on Thursday, with the peso closing at a new record low of P61.888 against the US dollar, shedding 23.8 centavos from Wednesday's P61.65 close. This surpasses the previous record low of P61.847 set on July 24. This renewed weakness was influenced by higher inflation estimates from the BSP for 2027 (5.4% from 4.5%) and 2028 (3.3% from 3.1%), primarily due to El Niño risks and potential minimum wage hikes. The BSP indicated these risks "require preemptive monetary action." Rizal Commercial Banking Corp (RCBC) chief economist Michael Ricafort noted the peso remains under pressure from a strong dollar, elevated oil prices, and geopolitical risks, with the local currency potentially trading between P61.75 and P62 per dollar in the near term.
