Why has the Philippines’ peso plunged to a record low?

What the report says

The Philippine peso has fallen to record lows, reaching 62.71 to the US dollar on Friday, according to Al Jazeera. The currency has weakened steadily since the start of the year and has lost about 6 percent against the dollar since January, with earlier lows also broken in July. The report says the slide reflects a mix of domestic economic strain and outside pressure from higher oil prices and geopolitical uncertainty tied to the Iran war.

Al Jazeera reported that the Philippines imports most of its oil, so rising crude costs force importers to buy more US dollars, adding pressure on the peso. At the same time, stronger returns on US Treasury bonds have encouraged investors to move away from developing-market currencies. The article also pointed to the Philippines’ fiscal and current account deficits, along with inflation that remains above the central bank’s target, as key factors weakening the currency.

The weaker peso has mixed effects. It can support exporters and boost the local value of overseas income, but it also makes imported goods, fuel, transport and other essentials more expensive. The report said inflation in the Philippines stood at 6.1 percent in August, well above regional peers, increasing concern about the pass-through from currency losses to consumer prices.

President Ferdinand Marcos Jr’s government has said it expects the central bank to step in if needed to stabilize the peso. A partial offset comes from remittances sent home by more than two million Filipinos working abroad, which the article described as an important cushion but not a full protection against further currency weakness.