The peso may sink to new record lows against the dollar this week after stronger-than-expected US labor data reinforced expectations of a hawkish US Federal Reserve, while the Middle East war continues to weigh on market sentiment. A wider interest rate gap between the US and the Philippines tends to push investors toward dollar-denominated assets, adding pressure on emerging market currencies like the peso.

On Friday, the local unit fell by seven centavos to close at a new all-time low of P62.59, down from P62.52 on Thursday and surpassing the previous record of P62.565 set on Sept. 2. The peso, one of Asia's more actively traded emerging market currencies, has repeatedly set fresh record lows in recent months as global headwinds pile up.

Year to date, the currency has weakened by P3.8, or 6.07%, from its P58.79 finish on Dec. 29, 2025. Week on week, the peso slid 32.5 centavos from its P62.265 close on Aug. 28.

A trader said in a phone interview that the peso sank on Friday as the market mainly positioned itself ahead of the release of the latest US nonfarm payrolls data later that day.

US job growth accelerated sharply in August while the unemployment rate held steady at 4.1%, pointing to an improvement in the labor market after recent struggles and keeping an interest rate increase from the Federal Reserve this month on the table, Reuters reported.

The jobless rate was unchanged even as the labor force grew by 683,000, adding another layer of strength to the report. Financial markets boosted bets on a rate hike at the US central bank's September meeting.

Those odds had been dialed back after Fed Governor Christopher Waller said at a Reuters NEXT Newsmaker event on Thursday that he was inclined to argue in favor of keeping rates steady if upcoming data confirmed inflation pressures were cooling.

Nonfarm payrolls surged by 162,000 jobs last month, the largest gain in five months, following an upwardly revised rise of 21,000 in July, according to the Labor Department's Bureau of Labor Statistics. Economists polled by Reuters had forecast a payroll increase of 56,000 after a previously reported drop of 23,000 in July. June payrolls were revised up by 11,000 to 20,000.

Estimates for August payrolls had ranged from a loss of 25,000 jobs to a gain of 121,000. Labor market momentum had decelerated after surging in the spring, a slowdown blamed partly on the oil price shock and supply chain strains stemming from the US-led war with Iran.

Despite the payroll surge and low unemployment, the labor market is not a source of inflation: wages rose 3.1% in the 12 months through August, after a 3.2% increase in July.

Financial markets were pricing in a roughly 62% chance of a quarter-percentage-point rate hike at the Fed's Sept. 15-16 meeting, up from about 49% on Wednesday, according to CME's FedWatch tool. The Fed's benchmark overnight interest rate currently sits in a 3.5%-3.75% range. This week's consumer price index report for August will determine whether the Fed raises rates.

Meanwhile, the peso continued to face pressure from rising global crude oil prices amid the conflict in the Middle East, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message. The Philippines imports most of the crude it consumes, making the peso particularly sensitive to oil price swings.

Beyond the exchange rate itself, a weaker peso raises the peso cost of dollar-denominated imports such as fuel and food, which can feed into domestic inflation — a dynamic policymakers have had to weigh as global pressures on the currency persist.

For the week ahead, the trader said the US payrolls data, which revived Fed hike expectations, could push the peso to retest its historic intraday low of P62.69, hit on Sept. 2. If that trough is breached, the P62.80 level could be the next psychological barrier, the trader added. The upcoming US CPI report is the main data point to watch for direction.

Mr. Ricafort, for his part, sees the peso trading between P62.20 and P62.70 per dollar this week, with the release of the latest US inflation reports serving as the key driver. — Aaron Michael C. Sy with Reuters