Philippine Peso Falls Back Toward 61 Mark

The Philippine peso weakened back toward the 61-per-dollar mark in early August after briefly touching a six-week high earlier this week, as markets reassessed the country’s economic outlook amid slowing growth and persistent inflation pressures. Philippine GDP expanded 2.3% year-on-year in Q2, the slowest pace since Q4 2009 excluding the COVID-19 period, as the economy faced an energy shock stemming from the Iran war and the fallout from a major corruption scandal. The weaker-than-expected growth came after the government’s DBCC revised down its 2026 growth target in June. Meanwhile, inflation remained elevated at 6.2% in July despite easing for a third consecutive month, staying above the BSP’s 3% target and keeping expectations for further tightening intact. The BSP has raised rates by 50 bps since April, with analysts expecting another 50 bps of hikes this year via two 25 bps increases at the August and October meetings.

The Philippine peso traded around 61.7 per US dollar in late July, hovering near its record low as the Bangko Sentral ng Pilipinas maintained limited intervention in the foreign exchange market while indicating only a small chance of further monetary tightening this year. The central bank intervened modestly last week to maintain orderly market conditions, with Governor Eli Remolona stressing that aggressively defending the peso against a strong US dollar would only deplete the country's foreign exchange reserves. While authorities remain concerned that the peso's weakness could fuel imported inflation, Remolona said the likelihood of aggressive rate hikes to bring inflation back to target remains small. Broad US dollar strength and elevated crude oil prices, which have weighed on Asia's oil-importing economies, have kept the peso under pressure, leaving the currency down more than 7% against the greenback so far this year.

The Philippine peso weakened to around 61.84 per US dollar in late July, moving closer to a fresh record low as surging oil prices and broad US dollar strength weighed on the currency. Crude prices have jumped more than 30% this month as the escalating US-Iran conflict spilled over into key other shipping routes, heightening concerns over deeper disruptions to global energy supplies. This has intensified pressure on oil-importing economies, including the Philippines, raising concerns over imported inflation and the country's trade balance. The Bangko Sentral ng Pilipinas intervened in the foreign exchange market this week to support the peso, while the Marcos administration expressed confidence that the central bank would act decisively if needed. Fitch Group's BMI Research forecasts the peso to trade within the 61–63 per US dollar range this year, making it one of Asia's weakest-performing currencies. The peso has fallen nearly 5% against the US dollar so far this year.