Peso at risk of hitting 64:$1 level–MUFG

MANILA, Philippines – The Philippine peso could weaken past the 64-per-dollar level if the Middle East conflict reescalates and oil prices reach new highs, MUFG Global Markets Research warned.

In a note to clients, the global bank said its baseline outlook still sees the peso gradually strengthening to 61 per dollar, assuming war de-escalation and US dollar softening.

READ: Yearender: Peso faces pressure heading into 2026

But it flagged risks of depreciation to the 62 to 64.50 range if the Iran conflict flares up again and pushes oil prices higher.

The peso is also likely to remain sensitive to global shocks, including a potential “Super El Niño” event and a more hawkish US Federal Reserve, MUFG said.

The peso strengthened by 7.1 centavos to close at 61.675 on Tuesday. The local currency touched an intraday low of 61.75—its record low—before recovering some losses to finish higher.

MUFG noted that the Philippines may be more exposed than other Asian and low-yielding currencies, given its current account deficit position.

The peso had been hitting record lows as rising US Treasury yields and expectations of tighter global monetary policy strengthened the greenback.

As it is, a weaker peso brings mixed effects.

Remittances from overseas Filipino workers stretch further in peso terms, supporting consumption, while exporters gain price competitiveness. But the slide risks stoking imported inflation and raising the peso cost of servicing foreign-currency debt.

The depreciation came despite the decision of the Bangko Sentral ng Pilipinas (BSP) last month to raise its key rate by a quarter point to 4.5 percent, the first tightening move in more than two years.

Monetary setting

BSP Governor Eli Remolona Jr. sees risk that the central bank may already be “behind the curve” despite its early tightening moves to choke off war-driven inflation, adding that policymakers are “considering” an off-cycle interest rate hike.

On the continued weakness of the peso, Remolona said that while the depreciation could fuel inflation, it could also boost Philippine exports and help narrow the country’s trade deficit. He also reiterated that the central bank does not target a specific level and will allow market forces to determine the value of the currency.

For its part, MUFG expects the BSP to raise rates by at least another 75 basis points, bringing the policy rate to 5.25 percent, and potentially more, if risks materialize.

“The good news from a local perspective is that we are seeing some initial signs of government spending pick-up after the sharp slowdown from the flood control infrastructure projects scandal,” the bank said. “Net-net, we see BSP likely reversing rate hikes in 2027 assuming oil prices decline and given the soft starting point of the economy.” INQ