The Philippine peso closed at its highest level this year at 58.46 against the US dollar on Monday, but analysts warned the local currency may weaken in the second half of 2026 due to trade pressures and interest rate differentials.
Monday’s finish marked a rise from 58.59 on Friday and represented the peso’s strongest performance in more than three months, or since it settled at 58.41 on Oct. 22, 2025. The recovery follows a volatile start to the year where the currency hit a record low of 59.46 on Jan. 20.
Despite the recent gains, the Fitch unit BMI expects the peso to remain weak throughout 2026. The research group projected a depreciation of 1.3 percent by year-end, reaching about 59.50 per dollar.
BMI said that in the short term, the currency is expected to trade sideways around the 59 level amid persistent downward pressure.
“We expect the countervailing forces of a weaker dollar and the BSP cutting rates ahead of the US Fed to keep the peso range-bound over the next few months,” BMI said.
The research group noted that the market has already priced in an expected 25 basis points rate cut by the Bangko Sentral ng Pilipinas (BSP) in February, following weak economic growth in the latter half of 2025.
The policy rate differential between the Philippines and the United States is projected to stay narrow at 75 basis points by the end of the year, while inflation is anticipated to pick up.
External factors are also likely to weigh on the currency. A 19-percent ‘reciprocal’ tariff on Philippine exports to the United States is expected to dampen trade with the country’s largest market and strain the national external position.
To combat significant fluctuations, the BSP is expected to utilize its reserves.
“We think BSP will intervene against huge downside volatility beyond 60/USD to curb imported inflation. BSP has sufficient reserves to defend the currency with gross international reserves remaining robust, covering more than seven months of imports as of December 2025,” BMI said.
