Peso to remain weak at 59:$1 until Q2

March 27, 2026 | 12:00am

MANILA, Philippines — The Philippine peso may face further pressure from sustained oil price rises amid escalating tensions in the Middle East, while the Bangko Sentral ng Pilipinas (BSP) is navigating a complex policy path with rising inflation risks, ANZ Research said.

In a report, ANZ sees the peso remaining weak at 59 against the greenback by the end of the second quarter, before recovering to 57.8 by the end of 2026.

”A further rise in oil prices could place additional downward pressure on the currency,” ANZ Research chief economist for Southeast Asia and India, Sanjay Mathur said.

Mathur noted that the peso appreciated during the first two months of the first quarter but renewed geopolitical tensions have recently pushed it above the P60-level against the dollar.

”The BSP has intervened to smooth volatility and limit excessive short-term fluctuations, while reiterating that it does not target or defend a specific exchange rate level,” he said.

Data from the Bankers Association of the Philippines showed that the local unit slipped to 60.10 against the dollar from its 59.95 finish on March 24.

At the same time, rising global oil prices present additional upside risks to inflation in 2026, as the Philippines is heavily dependent on Middle Eastern energy supplies, accounting for 98 percent of crude oil and 91 percent of liquefied petroleum gas.

Inflation quickened to 2.4 percent in February from two percent in January, bringing the average to 2.2 percent for the first two months of 2026, government data showed.

”A prolonged period of elevated oil prices could unanchor inflation expectations. Recent peso weakness has added to these inflationary pressures,” he said.

ANZ Research expects headline inflation to average around three percent in 2026 and 3.2 percent in 2027.

Economic Planning Secretary Arsenio Balisacan said inflation could accelerate to 7.3 percent to 8.6 percent for the full year, and could reach 14.3 percent at one point under the most severe scenario, where oil prices reach $200 per barrel and stay there for six months.

Meanwhile, Mathur said the central bank’s policy path is now more challenging as rising inflation risks will limit future easing.

BSP Governor Eli Remolona Jr. earlier mentioned that rate hikes are possible if oil prices remain over $100 per barrel for a prolonged period.

The Monetary Board held the policy rate at 4.25 percent after an off-cycle meeting yesterday, amid the ongoing conflict in the Middle East, which has pushed domestic fuel prices and transport fares higher.

The BSP said projections indicate that consumer prices would breach the four percent ceiling this year but would move back toward the tolerance range by 2027.

Meanwhile, inflation expectations remain well-anchored.