Philippine Peso Falls Back Toward Record Low

The Philippine peso breached the 61 per US dollar level in late April, hitting a fresh historic low and underscoring mounting pressure on the currency amid global economic uncertainty driven by the ongoing conflict in the Middle East. Continued tensions have disrupted oil supply chains, posing a significant challenge to the Philippine economy given its heavy reliance on crude oil imports from the region. Since the outbreak of the conflict, the peso has repeatedly fallen to record lows. The currency’s decline risks stoking imported inflation and increasing the peso cost of servicing foreign-currency debt. This comes at a time when inflation is already elevated, with headline inflation rising to 4.1% year-on-year in March, the highest level since July 2024. In response, the Bangko Sentral ng Pilipinas raised its policy rate by 25 basis points to 4.5% in mid-April, marking its first tightening cycle in over two years.

The Philippine peso weakened past 60.7 per USD, trading near its record low as broad dollar strength and risk-off sentiment continued to pressure Asian currencies. Escalating Middle East tensions, including renewed disruptions in the Strait of Hormuz following vessel seizures and heightened US naval warnings, kept oil prices elevated. Higher crude prices increase inflation risks for import-dependent economies such as the Philippines, widening external payments burden and supporting demand for the US dollar. At the same time, safe-haven flows into the dollar remained firm amid lingering uncertainty over US–Iran standoff. Meanwhile, domestic policy offered only partial offset. The Bangko Sentral ng Pilipinas raised rates by 25 basis points to 4.5%, its first hike in over two years, citing a weaker inflation outlook driven by higher global oil and food prices. BSP Governor Eli Remolona also signaled further tightening remains possible if needed, reinforcing a more proactive policy stance.

The Philippine peso fell to around 60 per USD, moving back toward its record low reached on March 30, as geopolitical tensions in the Middle East continued to weigh on market sentiment. Ongoing disruptions in key oil shipping routes, particularly the Strait of Hormuz, have pushed oil prices higher. As a major importer of crude oil, the Philippines remains highly exposed to these developments, which have already lifted domestic fuel costs and added upward pressure to inflation, while also increasing risks of below-target growth, a wider current account deficit, and potential headwinds to remittance inflows. The Bangko Sentral ng Pilipinas has urged banks to step up efforts to encourage firms to hedge foreign exchange exposure, highlighting the country’s vulnerability to external shocks. It also stressed that its priority is to maintain smooth market functioning and ensure the continued flow of funds, even amid oil price volatility, peso weakness, and global financial uncertainty.