Bias
Neutral to modestly bearish for PHP in 2026 as domestic growth remains challenged and external factors (BOP dynamics, policy rate expectations) keep downside pressure.
Key drivers
- BSP stance: exchange rates are market-determined; reserves are robust and interventions are focused on dampening inflation swings rather than daily volatility.
- ANZ outlook: peso rebound expected to be limited due to weak growth prospects, anticipated monetary easing, and a challenging external position, with governance concerns in infrastructure and a smaller 2026 infrastructure budget weighing on growth.
- MUFG forecast: peso likely to end 2025 around 58.70 per USD; inflation easing supports higher foreign investment in infrastructure (e.g., clean energy), with two more BSP rate cuts to 4.25% by Q2 2026.
- ING Asia FX Outlook: Philippines’ balance of payments deteriorized sharply in 2025 (about a $5 billion deficit); downside risks from potential US legislation affecting the BPO sector could reduce growth and FX inflows.
Range
PHP/USD at 0.016830, 0.9% below its 3-month average of 0.016975, having traded in a very stable 2.4% range from 0.016796 to 0.017198. PHP/EUR at 0.014480, 0.7% below its 3-month average of 0.014583, with a very stable 3.1% range from 0.014410 to 0.014850. PHP/GBP at 0.012560, 1.5% below its 3-month average of 0.012756, trading in a stable 4.9% range from 0.012483 to 0.013095. PHP/JPY is near 7-day lows at 2.6516, just above its 3-month average, with a range of 2.5734 to 2.6928, 4.6% wide.
What could change it
- A stronger-than-expected domestic growth rebound and clearer, larger external inflows (e.g., infrastructure investment) could lift the peso.
- A surprise improvement in the Philippines’ external position or a broader risk-on environment could reduce downside pressure.
- A lessened policy-rate path or more resilience in inflation could shift BSP expectations and alter rate differentials in favor of the peso.
- Ongoing risks from US policy affecting the BPO sector remain a key external risk; any resolution or delay could modestly support FX inflows and the peso.
