Philippine Peso Hits Record Low Amid Geopolitical Tensions and Inflation Concerns

The Philippine peso has reached a new record low, trading at P62.565 against the US dollar, marking a decline of 16.5 centavos from the previous day. This represents the fourth consecutive trading day of depreciation for the peso, which has now fallen significantly from P58.79 at the end of 2025, reflecting a year-to-date depreciation of 6.03%.

Analysts attribute this decline to a combination of factors, including heightened geopolitical tensions in the Middle East, rising oil prices, and a stronger US dollar. Ruben Carlo O. Asuncion, Chief Economist at Union Bank of the Philippines, noted that the peso's weakness is a manifestation of broader global economic conditions, stating that it reflects a combination of higher US yields, expectations for tighter US monetary policy, elevated oil prices, and geopolitical uncertainty.

“The peso’s weakness reflects a combination of higher US yields, expectations for tighter US monetary policy, elevated oil prices, and geopolitical uncertainty.”Ruben Carlo O. Asuncion, Chief Economist, Union Bank of the Philippines

During trading on Wednesday, the peso opened at P62.40, its previous record low, before reaching an intraday low of P62.69. Trading volume surged to $1.828 billion, compared to $1.306 billion the day prior. The Bangko Sentral ng Pilipinas (BSP) indicated that it is closely monitoring the foreign exchange market amid these developments, emphasizing its role in addressing disorderly market conditions that could exacerbate inflation.

Market sentiment has been influenced by the ongoing military tensions in the Middle East, particularly between the United States and Iran, which have led to increased oil prices and a stronger dollar. The Philippine Stock Exchange Index (PSEi) reflected this sentiment, declining by 0.67% to 6,053.23 points as investors reacted to the peso's fall and broader market conditions. Luis Limlingan, head of sales at Regina Capital Development Corp., remarked that weakness was further driven by the continued depreciation of the peso, which weighed on investor sentiment.

“The possibility of the peso testing the P63 level has increased, especially if elevated oil prices, geopolitical tensions, and a stronger dollar persist.”John Paolo R. Rivera, Senior Research Fellow, Philippine Institute for Development Studies

Looking ahead, analysts predict that the peso may test the P63-per-dollar level, which is viewed as a psychological threshold rather than a definitive policy trigger. John Paolo R. Rivera, a Senior Research Fellow at the Philippine Institute for Development Studies, mentioned that the possibility of the peso testing the P63 level has increased, especially if elevated oil prices, geopolitical tensions, and a stronger dollar persist. He cautioned, however, that the peso's trajectory will depend largely on external developments.

The BSP has raised benchmark interest rates multiple times this year in response to inflationary pressures, with the most recent increase of 25 basis points aimed at curbing inflation driven by volatile global oil prices and potential domestic wage hikes. Asuncion noted that while the peso's depreciation adds to inflationary pressures, the key question remains whether this trend will persist and affect broader inflation expectations.