GROWING concerns over increasing global oil prices and the country possibly entering a stage of stagflation further weakened the local currency against the dollar on Monday, pushing it to close at a new record low.
The Philippine Stock Exchange index (PSEi), meanwhile, extended its decline on Monday as rising oil prices, weak public infrastructure spending and concerns over inflation and further interest rate hikes weighed on investor sentiment.
The peso weakened by 33 and a half centavos to P63.95 from the previous record low of P63.615:$1. It marked the fifth straight trading day that the currency hit an all-time low.
It opened at P63.535 and traded between P63.5 and P63.95:$1. Volume reached P1.648 billion, higher than the previous P1.284 billion.
To date, the peso has depreciated by P5.16 or 8.78 percent from the P58.79 to a dollar recorded on Dec. 29, 2025.
A trader attributed the peso’s record lows to expectations of a Federal Reserve rate hike this week and ongoing domestic economic challenges.
“The risk to P64 remains intact should the Fed adopt a more hawkish tone from their September meeting,” the trader said.
Period of stagflation
Chinabank economist Domini Velasquez said higher oil prices over the weekend and US President Donald Trump’s remarks about possible renewed military action against Iran strengthened the dollar, putting further pressure on the peso.
“The peso’s weakness also reflects eroding investor confidence amid growing concerns that the Philippines could face a period of stagflation,” Velasquez said.
Stagflation is an economic condition that combines three painful problems at the same time — slow or shrinking economic growth, high unemployment and rising prices.
Velasquez added that the peso continued to hit record lows despite the Bangko Sentral ng Pilipinas’ four consecutive rate hikes, suggesting that “higher interest rates alone may not be enough to support the currency.”
The BSP policymaking body, the Monetary Board, has raised key rates by 125 basis points this year, with the benchmark rate now at 5.5 percent.
Velasquez said the peso could weaken further, with the dollar potentially breaching the P64 level in the near term if current pressures persist.
“While interest rate differentials remain a factor, we believe the peso’s sustained recovery will depend more on stronger economic fundamentals, improved growth prospects, and renewed investor confidence,” Velasquez said.
Higher oil prices
Michael Ricafort, Rizal Commercial Banking Corp. chief economist, said the peso further declined after global crude oil prices posted near six-month highs “partly amid some market concerns over recent signals on a possible large US attack on Iran after the Nov. 3, 2026 US midterm elections.”
“The sharp increase in global crude oil prices since the war on Iran started on Feb. 28, 2026 could lead to higher oil import bill for the country, as well as widen the country’s trade deficit/net imports, current account deficit, and balance of payments (BOP) deficit,” Ricafort said.
He said that while the central bank has stressed that it is not hiking the policy rate to defend the peso, “the BSP does intervene a little bit in the foreign exchange market but that is mainly to avoid swings in the exchange rate that tend to be inflationary.”
“The BSP [is] open to further interest rate hikes. An off-cycle BSP rate hike cannot be completely ruled out before the next BSP rate-setting meeting later in 2026 and in 2027. Such move could support the peso exchange rate,” Ricafort said.
However, Ricafort said the lower peso would benefit those that earn and own dollars such as OFWs, exporters, BPOs, foreign tourists and foreign investors, among others.
“But [this will be] offset by higher local prices as the Philippines is net importing country,” Ricafort said.
He said the peso today may re-test the P63.95 intraday record high posted yesterday with “possible intervention to smoothen the volatility.”
PSEi extends decline
The benchmark index dropped 87.45 points, or 1.53 percent, to close at 5,641.18, its lowest level since June 2026.
The market’s losses reflected growing concerns over the domestic economic outlook amid persistent cost pressures and continued weakness in the peso, according to analysts.
“The local market extended its decline as the case for a gloomy economic outlook continues to build up amid tepid public infrastructure spending, elevated inflation, and the possibility of more rate hikes by the BSP,” Japhet Tantiangco, research manager at Philstocks Financial Inc., said.
He added that the peso’s continued slide to record lows had also negatively affected the market.
Luis Limlingan, head of sales at Regina Capital Development Corp., said investors remained cautious as rising oil prices heightened concerns over inflation and economic pressures.
Market sentiment was further dampened by the Philippines’ infrastructure spending contracting for 14 consecutive months, raising concerns over the sustainability of economic growth, Limlingan said.
Trading was subdued, with net value turnover reaching P4.61 billion. Foreign investors were net sellers, recording net outflows of P45.06 million, according to Philstocks Research.
All sectors ended in negative territory, with conglomerates posting the steepest decline at 2.37 percent.
Only five index members advanced, led by Manila Electric Co., which gained 1.48 percent.
Across the broader market, decliners outnumbered advancers, with 106 stocks falling, 61 rising and 78 unchanged.
