Philippine peso Asia's worst-performing currency—Japanese bank

 

By Derco Rosal

Published Aug 31, 2026 12:00 am

The Philippine peso sank to a record low against the US dollar, making it Asia’s worst-performing currency over the past week as soaring energy import costs and widening trade deficit offset recent central bank rate hikes.

In an Aug. 28 commentary, Japanese lender MUFG Bank Ltd. noted that the peso’s underperformance stems from persistent pressure on the nation’s external account.

The local currency closed at ₱62.265 per dollar on Friday, Aug. 28, sinking past its previous historic low of ₱61.888 set just a day earlier.

Data from the Bankers Association of the Philippines showed the peso opened at ₱62.05 before hitting an intraday low of ₱62.27, driven by a surge in safe-haven demand amid rising geopolitical tensions.

The peso lost one percent for the week, extending a broader slide. According to MUFG, the currency is down 1.6 percent since the start of August, 1.4 percent for the current quarter, and 5.8 percent year-to-date—continuing a multi-year slump from 2024 and 2025.

The Thai baht also dropped 0.8 percent during the week. 
“Both currencies remained vulnerable to concerns over external balances, softer growth momentum and sensitivity to energy prices,” MUFG stated.

In contrast, the South Korean won and New Taiwan dollar gained 1.1 percent and 0.8 percent, respectively, against the greenback.

“Both currencies were supported by continued enthusiasm around the AI and semiconductor cycle, which boosted sentiment towards North Asian technology exporters and helped attract equity inflows,” MUFG added.

The Malaysian ringgit and Indian rupee also edged higher, backed by relatively stable domestic economic conditions.

To counter mounting pressures, the Bangko Sentral ng Pilipinas (BSP) raised its benchmark policy rate by 25 basis points to five percent, marking its third consecutive hike aimed at reining in sticky inflation.

Headline inflation slowed to a three-month low of 6.2 percent in July from 6.4 percent in June, down from its peak of 7.2 percent in April. Core inflation—which excludes volatile food and energy items—eased to 4.2 percent from 4.4 percent.

Despite the tighter policy stance, the peso’s decline accelerated after government data showed July imports jumped 59.7 percent, blowing out the trade deficit to roughly $6 billion, MUFG noted.

These widening imbalances and elevated commodity prices are expected to keep monetary authorities cautious. 
“Persistent inflation, a widening external deficit and peso weakness leave the BSP open to further tightening, albeit at a slower pace,” the bank said.

MUFG added that upcoming implementation of record-high wage adjustments presents additional upside risks to inflation, keeping the door open for another 25-basis-point hike.

Looking ahead, MUFG forecasts the peso to recover to ₱61.75 per dollar this quarter, strengthen to ₱61.5 in the fourth quarter, reach ₱61 by the first quarter of 2027, and move into the mid-₱60 range by the second quarter of 2027.