The Philippine peso has reached historic lows, hitting an all-time low of 62.71 to the United States dollar on September 4, 2026. The decline is attributed to a combination of domestic economic challenges and geopolitical tensions, particularly related to the ongoing conflict in Iran. Since January 1, the peso has lost approximately 6 percent of its value against the US dollar.
The currency previously reached a low of 61.847 to the US dollar on July 24, followed by a drop to 62.265 on the preceding Friday. This week, the peso closed at 62.565 on Wednesday before falling further.
Factors contributing to the peso's decline include rising oil prices, which have increased the cost of imports, and the strength of the US dollar. The Philippines relies heavily on oil imports from the Gulf, and disruptions in supply due to the conflict have exacerbated the situation. As oil prices rise, importers are converting more pesos to dollars, which puts downward pressure on the currency.
Additionally, rising yields on US Treasury Bonds have led international investors to favor dollar-denominated assets over those from developing economies, further weakening the peso. The Philippines is also facing significant fiscal and current account deficits, which have intensified these pressures.
Philip McNicholas, Asia sovereign strategist at Robeco Singapore, noted that the peso's weakness is largely due to these deficits and elevated inflation, which stood at 6.1 percent in August, significantly above the central bank's target of around 3 percent.
Currency depreciation can have mixed effects; while it may benefit exporters by making their products cheaper abroad, it also raises costs for consumers, particularly for imported goods. Masahiko Loo, senior fixed income strategist at State Street Investment Management, explained that rapid depreciation can lead to increased import costs and inflation, which is a concern for energy-importing economies like the Philippines.
Ashwin Binwani, founder of Alpha Binwani Capital, indicated that the peso could drop below 63.00 to the dollar if oil prices remain above $90 per barrel. He emphasized that while the peso's decline does not immediately affect all consumer prices, it primarily impacts the cost of imported inputs and energy.
President Ferdinand Marcos Jr's administration has committed to enhancing fiscal discipline and indicated that the central bank may intervene to stabilize the currency. A potential stabilizing factor for the peso is the substantial remittances from Filipinos working abroad, which amounted to a record $35.63 billion last year, representing about 8 to 9 percent of the country's GDP. Loo noted that while remittances provide some support for the peso, they do not fully shield the economy from external shocks.
Binwani highlighted that the peso's decline will unevenly affect households, increasing the cost of essentials that rely on imports, such as fuel and food, while providing some relief to families receiving remittances.