The Philippine peso depreciated to a new all-time low of 62.59 per US dollar on Friday, surpassing its previous record of 62.565 set on September 2. This marks a 6.07% decline year-to-date from its December 29, 2025, close of 58.79. The peso's persistent weakness is attributed to a combination of global factors, including surging oil prices which topped $95 a barrel after renewed US attacks on Iran, and increased expectations for a hawkish US Federal Reserve following stronger-than-expected US labor data.
The peso's decline is also exacerbated by domestic issues such as the Philippines' unfavorable external position, including a widening current account deficit and lower real interest rates. Analysts from Maybank noted that high oil prices and the anticipated increase in capital goods imports are likely to further weigh on the currency. Additionally, the usual support from remittance flows is softening due to modest or slowing growth in major source markets like the United States and the Middle East.
Financial markets are now pricing in a roughly 62% chance of a quarter-percentage-point rate hike at the Fed's September 15-16 meeting, up from approximately 49% earlier in the week. This heightened expectation for US monetary tightening, combined with geopolitical uncertainties in the Middle East and rising oil costs, is contributing to a "risk-off" sentiment among investors, leading to capital outflows from emerging Asian markets. For instance, benchmark 10-year bonds in the Philippines have seen price losses of 23.6% this year.
The peso's continued slide adds to inflationary pressures in the Philippines, particularly through higher fuel and import costs. The Monetary Board recently raised benchmark rates by 25 basis points for the third consecutive meeting in an effort to combat these pressures. While the P63 per dollar level is seen as an important psychological marker, analysts suggest that the currency's future direction will heavily depend on external developments, including oil prices, US interest rates, and geopolitical stability. Other Asian currencies, such as Indonesia's rupiah and Taiwan's dollar, also weakened, with MSCI's gauge of EM Asia equities dropping 1.8%.
