Peso falls to 59:$1 amid Middle East crisis
The Philippine peso sank to its lowest level in over a month on Friday, capping the week back to the 59 level against the US dollar, which continued its bullish run as the war in the Middle East rages on.
As this developed, Bangko Sentral ng Pilipinas (BSP) Gov. Eli Remolona Jr. warned that the central bank could reverse course and raise interest rates if global oil prices reach $100 a barrel and the US dollar continues its rally.
The local currency ended the trading week at 59 versus the greenback, 37 centavos weaker than its previous finish. This marked the peso’s worst performance since Jan. 27, 2026—when it closed at 59.085—and halted the currency’s brief rally seen early this year.
In an interview with CNBC yesterday, Remolona warned that a surge in crude to $100 per barrel, combined with sustained dollar strength that pressures the peso, could prompt the central bank to take forceful policy action to prevent inflation from breaching the official target range.
Even so, he said the recent rise in oil prices and the dollar’s appreciation had been manageable so far, even after the Middle East conflict erupted last weekend.
“For now, where the price of oil is and where the dollar is, we don’t see the need for a rate hike,” the BSP chief said. “At some point, if the price of oil goes to, say, $100 a barrel and the dollar continues to strengthen, then we’d have to consider a rate hike.”
Iran attack
Violence escalated in the oil-rich region after the United States and Israel attacked Iran, which retaliated and targeted Israel and neighboring countries hosting American forces, including the United Arab Emirates, Qatar, Kuwait, Bahrain, Iraq, Jordan and Saudi Arabia.
The conflict has also disrupted traffic through the Strait of Hormuz, a narrow but critical shipping route that carries a large share of global oil exports. The disruption has raised concerns about potential supply shocks that could be felt by energy-importing economies such as the Philippines.
Before the upheaval, domestic inflation had already risen to a 13-month high of 2.4 percent in February, though it remained within the BSP’s 2- to 4-percent target band.
The central bank lowered its key policy rate to an over three-year low of 4.25 percent to support a sluggish economy reeling from a high-profile corruption scandal. However, the BSP recently acknowledged that its ability to stimulate growth is nearing its limit.
That said, the flare-up in geopolitical tensions poses a fresh challenge for policymakers. A rate hike, if needed to rein in inflation, could complicate the BSP’s progrowth campaign, which is being constrained by slow government spending and still unresolved corruption issues.
“For now, we’re where we want to be in terms of monetary policy,” Remolona said in the same TV interview.
Unlikely breach
Economists say a breach of the central bank’s inflation target appears unlikely at present. Miguel Chanco, an economist at Pantheon Macroeconomics in London, said, “This crisis is unlikely to prompt a sudden about-turn in BSP policy.”
Deepali Bhargava, an economist at ING Bank, noted that the government’s plan to suspend excise taxes on fuel if crude prices jump could limit the pass-through to retail prices.
“We do not expect the central bank to respond to sustained higher oil prices with rate hikes,” Bhargava said. “Instead, the growth drag from higher energy costs would increase the likelihood of another rate cut over the year.”
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