By Katherine K. Chan, Reporter
THE PHILIPPINE PESO will likely remain the weakest Asian currency despite further monetary policy tightening by the central bank because the economy stays vulnerable to volatile global oil prices amid the continued Middle East war, analysts said.
This because the peso on Tuesday closed on the record-low level of P61.75 versus the greenback, the identical finish logged on Monday, Bankers Association of the Philippines data showed.
In a report published late on Monday, ING Think economists noted that the impact of oil price swings on the local unit could offset the expected support of additional policy rate hikes by the Bangko Sentral ng Pilipinas (BSP). (See related story)
“We proceed to expect a frontloaded but measured tightening cycle, price 75 bps (basis points) in 2026,” said ING Regional Head of Research for Asia Pacific Deepali Bhargava, Senior Economist for South Korea and Japan Min Joo Kang, and Chief Economist for Greater China Lynn Song.
“While this might provide some near-term support to the PHP (Philippine peso), the currency’s trajectory will remain closely tied to grease price dynamics,” they added.
A separate report from MUFG Bank, Ltd. on Tuesday showed that the peso suffered the sharpest depreciation amongst currencies in emerging markets in Asia because the Middle East war erupted on Feb. 28.
Based on the report penned by MUFG Senior Currency Analyst Michael Wan, the local unit declined by 6.6% against the dollar from Feb. 28 to May 18.
This was followed by the Indian rupee, which went down by 5.6%, Indonesian rupiah (5%), Thai baht (4.8%), South Korean won (4%), Malaysian ringgit (2.1%), Japanese yen (1.8%), Singapore dollar (1.1%), Vietnamese dong (1.1%), and Taiwan dollar (1%).
The peso has traded across the P60- to P61-a-dollar handle for a couple of month or since late April, even plunging to back-to-back historic lows versus the greenback.
This got here even after markets anticipated some relief for the peso following the BSP’s move to lift the benchmark borrowing cost during its April 23 meeting.
The important thing rate of interest now stands at 4.5% after the Monetary Board delivered its first 25-bp hike last month because it sought to temper second-round price effects and keep inflation expectations anchored amid rising risks from the energy crisis.
ING analysts said the BSP may deliver its second-straight hike at its June 18 review as inflation risks prove more urgent than growth concerns.
“The most recent data points suggest inflation risks at the moment are outweighing growth concerns,” they said. “On this context, we don’t see the weak GDP (gross domestic product) print deterring Bangko Sentral ng Pilipinas from mountaineering in June.”
Inflation breached the central bank’s 2%-4% goal and market projections for the second month in a row as soaring oil prices spilled over to other key commodities.
In April, high food and utility prices amid still elevated energy costs led the headline print to speed up to an over three-year high of seven.2%.
Then again, the economy faltered in the primary quarter, with growth easing to 2.8% from 3% within the previous quarter and 5.4% a yr ago as oil shocks added to the lingering effects of last yr’s flood control mess.
For ING analysts, nevertheless, the economy could remain under pressure amid growing political uncertainty surrounding Vice-President Sara Duterte-Carpio’s impeachment.
“Higher political uncertainty with the impeachment of the vice-president can further push out reforms and growth recovery,” Ms. Bhargava, Ms. Kang, and Mr. Song said.
Meanwhile, Metropolitan Bank and Trust Co. (Metrobank) also sees further BSP tightening as still elevated oil prices and uncertainties over Iran and the US’ peace talks are expected to stoke inflation in the approaching months.
“Metrobank still sees elevated risk and volatility within the near term while a peace deal has not been struck,” it said in a note on Monday. “Oil prices are poised to remain high, as global supply stays constricted on account of the war’s impact on Middle East oil facilities. Consequently, domestic inflation is predicted to quicken in the approaching months.”
Nevertheless, it noted that increased demand for the US dollar will proceed to tug the peso, with global dollar flows, not domestic aspects, likely driving foreign exchange movements.
Still, the peso’s depreciation could also be capped at P62 against the dollar, in accordance with the bank.
“USD/PHP strategy stays range-bound with a slight USD-positive bias, as strong dollar fundamentals and regular corporate demand proceed to support the pair, particularly on dips,” Metrobank said.
“Nevertheless, the upside stays capped near the P61.75-P62.00 resistance zone on account of strong supply and positioning. The pair is more likely to remain driven by external USD flows reasonably than domestic catalysts, reinforcing a tactical trading approach,” it added.
Then again, ING said global oil prices potentially averaging around $100 per barrel within the quarter will proceed to weigh on the country’s current account deficit.
The BSP earlier said the Philippines may even see a wider current account gap of $20.3 billion or -4% of GDP this yr because the Middle East war could strain the country’s external position.
In 2025, the country had a current account deficit of $16.291 billion or -3.3% of GDP.