Philippine Peso Hits Record Low Past 62 as MUFG Calls It Asia’s Worst Performer

The Philippine peso has broken through 62 to the dollar for the first time, and a rate-hiking central bank has not been able to arrest it.

The currency closed at 62.265 per dollar on Friday 28 August, sinking past its previous record low of 61.888 set the day before, according to Bankers Association of the Philippines data. It opened at 62.05 and touched an intraday low of 62.27.

In a commentary dated 28 August, MUFG Bank described the peso as Asia's worst-performing currency over the past week, attributing the underperformance to persistent pressure on the country's external account from soaring energy import costs and a widening trade deficit that offset recent central bank rate increases.

The Japanese lender put the peso down 1.6% since the start of August, 1.4% for the quarter and 5.8% year to date, continuing a multi-year slump running through 2024 and 2025.

Rate hikes have not held the line

The decline came directly after monetary tightening rather than in its absence.

The Bangko Sentral ng Pilipinas raised its policy rate by 25 basis points to 5% on Thursday, a third consecutive increase and the highest level since June 2025, bringing cumulative tightening since April to 75 basis points. Governor Eli Remolona Jr said the Monetary Board considered holding but opted for what he called a pre-emptive hike against emerging inflation risks.

The peso weakened 23.8 centavos on the announcement, then fell a further 37.7 centavos the following day.

That sequence matters. A currency falling on a rate rise indicates markets are pricing something the policy rate does not address — in this case an external account under strain from energy imports.

Inflation is the reason the BSP is tightening into a weak economy. Headline inflation was 6.2% in July, above the 2% to 4% target, and the central bank expects August between 5.5% and 6.5%, citing higher rice, vegetable, fruit and fish prices from unfavourable weather alongside elevated domestic fuel costs. It has raised its 2027 inflation forecast to 5.4% from 4.5%.

HSBC economist Dacanay described the BSP's messaging as more hawkish than expected given weak growth, pointing to core inflation, inflation expectations above target, the record-low peso and a drop in foreign exchange reserves relative to import needs.

The AI cycle is splitting Asian currencies

MUFG's commentary contains the most revealing observation, and it is comparative.

The peso and the Thai baht, down 0.8% over the week, remain vulnerable to concerns over external balances, softer growth momentum and sensitivity to energy prices, MUFG said. The South Korean won and New Taiwan dollar gained 1.1% and 0.8% respectively, supported by continued enthusiasm around the AI and semiconductor cycle, which boosted sentiment toward North Asian technology exporters and attracted equity inflows.

Asia's currency market is now sorting economies by which side of two global shocks they sit on. Semiconductor exporters are being rewarded; energy importers are being penalised. The Philippines is on the wrong side of both, and analysts have warned a prolonged closure of the Strait of Hormuz could push crude substantially higher.

Equities have followed. The PSEi fell 0.8%, or 48.25 points, to 5,956.33 on Friday — a fourth consecutive decline and its lowest close in 11 weeks — with the All Shares index down 0.61% to 3,318.99.

What to watch

August inflation data will test whether the BSP's 5.5% to 6.5% range holds, and a print at the upper end would strengthen the case for October.

The second is reserves. HSBC flagged the decline relative to import needs, which is the metric that turns a currency slide into a balance of payments concern.

The third is oil. Every element of the peso's weakness traces to energy import costs, and the Philippines has almost no domestic supply.