THE peso’s recent weakness reflects more than just a resurgent dollar but also structural vulnerabilities, Metrobank said.
"Not all peso moves are US-dollar stories," Metrobank markets research head Anna Dominique Cudia said in a commentary.
"The exchange rate reflects a balance between global forces and domestic fundamentals,” she added.
The peso has come under pressure in recent months amid the war in the Middle East, which has boosted demand for the greenback as investors flock to safe-haven assets.
However, Cudia said external factors alone do not explain the local currency's movements.
She noted that the Philippines' structural dependence on imports, particularly oil and key food items, creates recurring demand for foreign exchange that can weaken the peso over time.
"At the same time, the Philippines' status as a net importer — especially of energy and key food items — creates recurring demand for foreign currency," Cudia added.
The peso has fallen to new record lows in the last few months as the Middle East war has unfolded, the latest being the P61.75:$1 hit on May 18.
It returned to the P60 per dollar level last week on news of a looming peace deal, but closed 34.8 centavos weaker at P61.123:$1 on Monday.
Cudia said that foreign exchange movements were being influenced by a complex mix of interest rate policies, capital flows, trade dynamics and investor confidence.
Central bank actions, including policy signals and guidance, can also shape expectations and liquidity conditions, with growth trends and political developments additionally playing a role.
Rapid expansion in net-importing economies tends to widen trade deficits by increasing demand for foreign currencies, Cudia noted, while stable governance and policy credibility help anchor exchange rates by attracting capital.
“Seasonal patterns also matter, with the peso often facing pressure when import demand rises ahead of the year‑end period,” she said.
“Policy credibility and the broader investment climate remain important in influencing capital flows over time.”
The Middle East war was said to have complicated the picture, as it had strengthened the dollar and led to higher commodity prices and shifts in capital flows.
"For many Asian economies, dependence on Middle East energy imports means higher oil prices translate into greater demand for US dollars and wider trade pressures," Cudia said.
Metrobank estimated that about 98 percent of the country's crude oil imports originate from the Middle East, making it among the region's most vulnerable to energy-related shocks.
Unlike commodity-exporting economies that can partly offset higher energy costs through export revenues, the Philippines remains a net importer.
Cudia, however, said the peso was continuing to benefit from structural sources of support such as remittances from Filipinos working overseas and revenues generated by the country's business process outsourcing sector.
She also noted that the peso historically tended to weaken during the third quarter as import demand rises, before strengthening in the fourth quarter amid increased foreign exchange inflows associated with the holiday season.
Understanding the drivers behind exchange rate movements, Cudia said, is more important than attempting to predict short-term fluctuations.
"FX does not move in isolation," she said. "Peso dynamics reflect both global conditions and domestic fundamentals."
NIÑA MYKA PAULINE ARCEO