THE Philippine peso touched a new historic low of P62.605 against the US dollar on Sept. 2, before slightly recovering to P62.590 on Sept. 4, according to data from the Bankers Association of the Philippines (BAP). The recent movements follow a continuous weakening trend from P62.400 on Sept. 1 and P62.270 on Aug. 28.

The peso’s decline comes amid rising oil prices, geopolitical uncertainties, and domestic economic pressures, despite the Bangko Sentral ng Pilipinas (BSP) raising its benchmark interest rate to 5 percent to address potential inflation risks.

The peso opened at P62.250 before weakening throughout and settling at P62.590 against the US dollar. Trading volume settled at $1.306 billion, down from $1.96 billion on Sept. 1.

What’s Driving the Slide

Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, pointed to external forces, specifically a stronger US dollar, as key drivers of the peso’s decline.

“The peso’s depreciation to a fresh record low reflects a stronger dollar environment driven by rising US Treasury yields, growing expectations of a Federal Reserve rate hike and higher oil prices amid escalating geopolitical tensions in the Middle East,” he said. 

He elaborated that these conditions pulled investors toward dollar-dominated assets while stoking concerns over inflation and import costs in oil-dependent economies like the Philippines. 

Meanwhile, Mitsubishi UFJ Financial Group (MUFG) Research senior currency analyst Lloyd Chan noted that rising US yields and oil prices are affecting Asian currencies, especially the Philippines as a net energy importer. With its heavy reliance on imported fuel, the country is exposed whenever the dollar rallies broadly. 

On Aug. 28, the peso fell over 5% year-to-date, becoming one of Asia’s worst-performing currencies. While tech-exporting neighbors like South Korea and Taiwan countered dollar pressure with high-value electronics exports, the Philippines remains far more vulnerable as a net energy importer.

Following the peso’s decline, the BSP raised its benchmark interest rate to 5 percent, making it its third hike of the year, following the 4.75 percent in June 18, in a move expected to support the currency. 

However, BSP Governor Eli Remolona Jr. stated that the central bank will not focus on forcing the peso back to P60 but will instead manage sharp movements in the exchange rate. 

“We can try to slow it down, but we cannot fix it at P60. We can’t do that. We would run out of reserves. We would run out of dollars,” he said.

Silver Lining for OFW Families, Squeeze on Ordinary Filipinos

Despite the Philippine peso’s continued decline, Remalona said that a weaker peso increases the value of remittances, benefiting families of overseas Filipino workers (OFWs) and the business process outsourcing (BPO) sector, which in turn supports domestic consumption.

However, the Philippine Institute for Development Studies (PIDS) notes that this benefit creates a vicious cycle that traps developing economies in a cycle of economic stagnation brought by remittance reliance. 

A weaker peso can push diesel prices almost immediately, thus influencing transportation expenses. On Aug. 3, the Land Transportation Franchising and Regulatory Board (LTFRB) started a hearing on fare hike petitions filed by major transport groups such as PISTON and Manibela, as operators face rising operational costs brought by the ongoing Middle East conflict. 

In an ABS-CBN Facebook post reporting the peso’s ₱62.565 close, comments filled triggered concern as users express financial distress. Netizen Bens Print Ata lamented, “Isang libo ko sa palengke kapiranggot na lang mabili, grabi.”

Elizabeth Lee, chair of the Federation of Philippine Industries (FPI), cautions Filipinos at home, “With raw materials and energy as essential imports, the peso’s slide past 62 can fuel cost-push inflation. Rising input costs will cascade from wholesale and eventually into retail prices, even as rate hikes attempt to slow demand,” she said.

Importers, Exporters, and Businesses

Asuncion notes that the demand for dollars from importers also helped drive the peso's weakness, as companies now need more pesos to pay foreign suppliers, with these higher costs often passed on to consumers.

Exporters and BPO sectors, meanwhile, may gain from the weaker peso as their dollar earnings yield greater peso returns. However, former BSP Deputy Governor Giwa Guinigundo warned that the benefits may be limited. “The peso breaking P62 to the dollar may help exporters earn more pesos, but in an import-dependent economy, that advantage can quickly disappear.” 

The Broader Economy

A weak peso can also become self-reinforcing: pricier imports fuel inflation, which can push the BSP toward higher rates. Ascunsion said that while it can grow slowly, the stabilization will depend largely on oil prices, the strength of the dollar, and global risk sentiment.

MUFG's Michael Wan expects the peso to hover near P62 through the rest of 2026 before gradually strengthening toward P61 by mid-2027 due to an economic recovery as the country’s domestic fiscal conditions stabilize, while Reyes Tacandong & Co.'s Jonathan Ravelas says geopolitical risk remains the main wildcard.