THE Philippine peso weakened further against the US dollar on Monday, weighed down by lingering Middle East tensions and hawkish signals from the US Federal Reserve.

The local currency depreciated by 3.1 centavos to close at P62.78 against the greenback, from its P62.749 finish on Friday, according to data from the Bankers Association of the Philippines' website.

The peso opened Monday's session slightly weaker than Friday's close at P62.75 per dollar. Its intraday best stood at P62.74, while its worst showing was at P62.84 against the greenback.

Dollars traded sank to $1.044 billion from $1.508 billion in the previous session.

The peso's level carries weight beyond the trading floor: the Philippines imports its crude oil requirements, so a softer local currency makes dollar-priced fuel and other imports costlier in peso terms — a sensitivity that grows when a conflict is already straining global energy supply.

"The dollar-peso closed a bit higher, still amid tensions in the Middle East despite lower global crude oil prices. The lack of market catalysts kept the pair mostly sideways," the first trader said by phone.

"The peso weakened as market prospects of further rate hikes from the US Federal Reserve firmed following hawkish signals from Fed Chair Kevin Warsh last week," the second trader said in an e-mail.

For Tuesday, the second trader said the peso may continue to depreciate due to geopolitical risks, moving within a range of P62.60 to P62.85 per dollar. The first trader gave a range of P62.60 to P62.90 — both framed around the same two forces that drove Monday's trade: geopolitical risk and the path of US interest rates.

The latest escalation came on Sunday, when Iran and the United States exchanged new threats. President Donald J. Trump warned that Iran would fail economically or see its leadership wiped out if it did not make a deal, while Iran's military said it would retaliate harshly to any fresh attack, Reuters reported.

The conflict has looked stalemated for months, with no sign either side was ready to make concessions, even as it has deepened a global energy crisis, cratered swathes of Iran's economy, and spilled over into new regional escalations.

Earlier, Iran's military central command said any new attack would trigger sustained retaliation against US bases and interests, and that Washington's regional allies would be considered parties to the conflict.

Meanwhile, the Fed raised interest rates last week for the first time in three years and switched to a more aggressive stance on inflation. Projections released alongside the rate-hike decision showed all but two Fed policymakers see at least one more quarter-point increase this year. For currencies like the peso, the stakes are straightforward: higher US yields tend to pull capital toward dollar-denominated assets, and the wider the rate gap with emerging markets, the more pressure those currencies face.

Rate futures markets reflect a two-in-three chance that the Fed's policy rate ends 2026 in the 4.00% to 4.25% range, with a strong likelihood of it climbing by at least another quarter point beyond that by mid-2027.

— A.M.C. Sy with Reuters