Peso sinks to fresh all-time low on strong dollar, surge in oil prices

By Aaron Michael C. Sy, Reporter

THE PESO fell to a fresh record against the dollar on Wednesday, weighed down by broad dollar strength and rising global oil prices amid expectations of prolonged supply disruptions in the Middle East and a hawkish outlook for US monetary policy.

It closed at P61.567 a dollar, weakening by 26.7 centavos from its previous record finish of P60.30 on Tuesday, according to Bankers Association of the Philippines data posted on its website. Year to date, the peso has depreciated by P2.777 or 4.51% from its P58.79 close at end-2025.

The peso opened the session slightly stronger at P61.20 but quickly lost ground, touching an intraday low of P61.67 before settling near that level at the close. Total dollar trading declined to $1.61 billion from $1.75 billion in the previous session.

Market participants attributed the peso’s weakness to sustained demand for the dollar, driven largely by rising oil prices and geopolitical risks.

A trader said the currency continued to slide as global crude prices climbed on expectations of an extended blockade affecting Iranian oil exports, which could tighten supply in the global market.

Oil prices rose further on Wednesday, extending a multi-day rally. Brent crude futures climbed above $112 per barrel, while US West Texas Intermediate (WTI) crude breached the $100 level.

The continued gains reflect concerns that supply disruptions in the Middle East could persist, especially with reports that the US might prolong its blockade targeting Iranian ports.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the war could constrain global oil supply and push fuel costs higher, adding pressure on the peso.

Higher oil prices typically widen the Philippines’ trade deficit since the country is heavily dependent on imported fuel.

He added that dollar demand was also boosted by hedging activity after the peso breached the P61-a-dollar level.

“The breach above P61 since Tuesday was largely triggered by some hedging activities on the country’s fuel imports and the importation of other goods in view of the state of national energy emergency that came into effect on March 24,” Mr. Ricafort said via Viber.

Another trader said expectations of prolonged elevated interest rates in the US also supported the dollar.

Market sentiment has shifted toward a later timeline for policy easing, with some investors now expecting the US Federal Reserve to delay rate cuts until much later than previously anticipated.

The dollar edged higher against major currencies as investors awaited the Federal Reserve’s policy decision later in the day. While the central bank was widely expected to keep rates unchanged, markets were closely watching for signals on the future policy path and the economic impact of the US-Israel war on Iran.

The euro and British pound both slipped slightly against the dollar, reflecting the greenback’s broad-based strength. Analysts said the dollar’s resilience underscores its status as a safe-haven asset during periods of global uncertainty.

CORRECTIVE PULLBACK
A third trader noted that the peso was also pressured by concerns over domestic inflation and economic growth.

The Bangko Sentral ng Pilipinas (BSP) last week raised its inflation forecasts, projecting it to average 6.3% this year and 4.3% in 2027 — both above its 2%-4% target.

These upward revisions come amid rising global commodity prices, particularly oil, which could feed into higher transport and production costs.

Inflation is also expected to remain above 5% for the rest of the year, adding to concerns about purchasing power and economic stability.

The BSP last week raised its key policy rate by 25 basis points to 4.5%, its first rate hike since October 2023 and signaling a shift away from its previous easing cycle.

Central bank officials have said further tightening might be needed to contain inflationary pressures.

Traders said the peso’s movement would continue to depend on global developments, particularly oil prices and US monetary policy signals.

Some expect a corrective pullback if the currency approaches the P61.80 level, although risks remain tilted to further weakness.

For the near term, analysts expect the peso to trade at P61.40 to P61.70, with volatility likely to persist amid the war and shifting market expectations.