go through Luisa Maria Jacinta C. Jocson, Senior Reporter
The Philippine peso is expected to continue to rally against the dollar until early 2026, with central banks’ expectations for further policy easing and improved trade and investment flows.
“We continue to forecast the peso to strengthen the dollar, reflecting a continued space for low inflation, continued tax reductions, improvements in FDI and possible trade deals with the United States, coupled with strong infrastructure spending,” MUFG Global Socrals Research said in a report.
The Tokyo-based research firm expects the Peso to play against Greenguard p55.60 in the third quarter and further strengthen to P55 in the fourth quarter. It sees peso hitting the $54.50 The first quarter of next year.
The peso closed on Tuesday at a price of P55.721, weakening the 2.1 Centavos from P55.70 completed a day ago.
It has been trading on the P55-A price since late April, last month’s high distance of nearly two years as Moody’s rating lowered the U.S. triple A rating.
“Part of this change reflects global factors such as the U.S.-China tariff suspension, and our expectations are now more modest to the weakness of the Chinese yuan,” Muff said.
It added: “More importantly, the domestic inflationary pressure in the Philippines is also higher than expected, which provides further room for BSP (Bangko Sentral Ng Pilipinas) to lower interest rates to support the economy.”
According to Reuters, investors have fallen to a six-week low on defense as U.S. unstable trade policy casts a shadow on the market and investors have fallen to a six-week low on defense ahead of key developments later this week.
MUFG raises the Philippines inflation rate to 1.8% this year, below the central bank’s 2-4% target and 2.3% forecast. Inflation was 2% in the first four months.
MUFG said it was expecting “a decline in domestic rice prices, a decline in manageable oil prices, and the risk of rising transportation fares and electricity prices falling.”
It added: “So we continue to predict that BSP stays poor and lowers policy interest rates by 75 basis points (BPS) to increase it to 4.75% by the end of 2025 to 2025.”
The Monetary Commission will hold its next exchange rate setting meeting on June 19. Eli M. Remolona, Jr., Governor of BSP. It said it cut the price cut by A$2.5 billion this month.
Central banks have reduced borrowing costs by 100 basis points since the start of their easy cycle last August.
“We also implicitly assume that a trade agreement with the United States will be reached and that the average tariffs on the Philippines will be below the reciprocal level of 17%,” Mufg said.
It added that foreign direct investment (FDI) traffic and strong infrastructure spending will also contribute to the peso.
Foreign exchange risk
However, the research firm cites risks of peso’s performance, including U.S. plans to tax non-U.S. citizens, mitigating FDI approval and domestic political risks.
“Despite expectations of the dollar weakness, we are reluctant to predict more peso strength [these] Reason,” it said.
The proposed 3.5% U.S. remittance tax could reduce the Philippines’ share of remittances in economic output by 0.1%, MUFG said.
The United States is the highest source of remittances in the Philippines, accounting for about 40% of the total.
“Our basic case is targeting recent Senate election results to slow the pace of reform, but we don’t think it’s possible to change the policy trajectory, including infrastructure construction,” it said.
John Paolo R. Rivera, a senior researcher at the Philippine Development Institute, also marked the risk to the peso prospect.
“The p55 level may persist in the short term, but depending on several domestic and global factors, there may still be fluctuations,” he said in a Viber message.
He expects the peso to trade against the U.S. dollar in the second half at P54.50 to 56.60, prohibiting any shocks.
“The relative strength of the currency reflects the inflow of US dollar, low inflation and the dirty stance of the BSP,” he said. “If the BSP starts to slow down before the Fed, or if the import speed surges without offsetting the inflow, there may be a mild depreciation bias.”
Oikonomia Advisory and Research, Inc. Reinielle Matt M. Erec, an economist, said the recent weakness in the dollar was due to investors selling their assets.
“We may see exchange rates continue to strengthen as the risks of inflation and credit concerns continue to exist,” he said in a Viber message.
The dollar index measures its performance against six other major currencies by 0.6%, while the price of 98.75 is well below the three-year low of 97.923 in late April, Reuters reported.
US President Donald J. Trump (Donald J.
“However, the downside risk of the exchange rate is that if we adopt a dirty monetary policy strategy, the United States may suspend lowering tax rates or raise the currency rate to avoid capital outflows and inflation,” Eris said. “This could put up pressure on the exchange rate.”
