Philippine Peso Falls Back Toward 61 Mark

The Philippine peso depreciated past 62 per dollar on Friday, hitting a new all-time low as concerns over the domestic inflation outlook kept pressure on the currency. The move came despite the Bangko Sentral ng Pilipinas raising its policy rate by 25 bps to 5% in a third straight hike, described as a preemptive move. The BSP raised its 2027 inflation forecast to 5.4% from 4.5%, citing risks from severe El Niño conditions and higher minimum wages, while lowering its 2026 forecast to 6.1% amid easing oil prices. Still, elevated oil prices continue to pose a risk to the peso, as the Philippines imports almost all of its oil needs, potentially widening the current-account deficit and adding to domestic inflation pressures. Governor Eli Remolona said the central bank would focus on smoothing sharp currency movements rather than defending a specific exchange-rate level. The peso has now lost more than 5% against the dollar this year, leaving it among Asia’s weakest performers.

The Philippine peso weakened past 61.8 per dollar, hitting a new all-time low as rising oil prices put renewed pressure on the currency. The peso surpassed the previous record low of 61.850 set in July, as Brent crude jumped more than 5% over the past four days amid renewed Middle East tensions and concerns over energy supplies. The Philippines is particularly vulnerable to higher oil prices as it imports almost all of its oil requirements, raising the risk of stronger inflationary pressures. The Bangko Sentral ng Pilipinas has already raised its policy rate to 4.75% and intervened in the foreign-exchange market, but continued oil gains and elevated global bond yields could keep pressure on the currency. President Ferdinand Marcos Jr. also indicated that they will not use all of the country’s reserves to defend the peso. The currency has now lost more than 5% this year, ranking among Asia’s weakest performers, while foreign-exchange reserves have fallen nearly 7% to $103 billion.

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.