The combination of a prolonged war in the Middle East and a hawkish US Federal Reserve (Fed) could send the peso weakening to the 62 to 63 level, MUFG Global Markets Research warned.

In its monthly foreign-exchange outlook, MUFG said its baseline forecast still sees the peso trading between 60.5 and 61.5 over time. But a longer conflict and delayed rate cuts by the Fed could intensify pressure on the currency.

“In a risk scenario of prolonged conflict, we continue to see the Philippine peso as vulnerable and USD/PHP rising towards 62 to 63, especially if this is combined with a hawkish Fed,” the bank said.