The Philippine peso breached the P63-per-US-dollar level for the first time on Thursday, after hot US inflation data bolstered bets that the US Federal Reserve could keep interest rates higher for longer.

The currency shed 19 centavos to close at P63.06 versus the greenback, down from its P62.87 finish on Wednesday, according to Bankers Association of the Philippines data. The close broke the peso's previous record low of P62.90, set on Oct. 8.

The local unit opened the session slightly stronger at P62.83 per dollar and climbed to an intraday high of P62.75 before sliding to a record intraday low of P63.15, surpassing its previous low of P62.925 on Sept. 15.

Dollars traded jumped to $1.5 billion from $941 million in the prior session.

Year to date, the peso has weakened by P4.27, or 6.77%, from its P58.79 finish on Dec. 29, 2025.

"The peso's move beyond P63 per US dollar reflects persistent dollar strength following stronger US inflation data, which has reinforced expectations that the Federal Reserve will keep interest rates higher for longer," Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

Dollar demand, he added, has also been supported by high US Treasury yields, elevated crude oil prices, and geopolitical uncertainties. Higher US Treasury yields raise the return on holding dollar-denominated assets, reinforcing the currency's appeal to global investors.

Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said in a Viber message that the peso's decline likewise reflected domestic concerns over inflation and investment inflows.

Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message that the currency was also weighed down by the decline in the country's gross international reserves (GIR).

The Philippines' dollar reserves — the pool of foreign exchange the central bank holds as a buffer for external payments — dropped 8.3% to $99.997 billion in the nine months to September, from $109.06 billion a year earlier That was the lowest GIR level in three years — since the $98.116 billion logged in September 2023 — and marked the seventh straight month of annual contraction.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted in a Viber message that there could have been intervention from the central bank or a smoothening of market volatility toward the P63.10 level, adding that the psychological threshold had been adjusted from the previous P63 ceiling.

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. earlier said the central bank does not defend the peso at a specific level at the risk of depleting the country's GIR, noting that it intervenes in the foreign exchange market only to smoothen inflationary swings.

"BSP intervention can temper volatility, but peso weakness may persist while the dollar remains strong. A sustained recovery would need stronger dollar inflows, lower import demand or a broader weakening of the dollar," one trader said. The same trader added that it will be difficult for the peso to strengthen sustainably as the country remains a net importer — buying more from abroad than it sells overseas, which keeps up demand for dollars to pay for imports.

Analysts expect the dollar-peso to remain volatile in the near term. A second trader said the peso will likely stay volatile and "quite tilted on the weaker side as the BSP already entered its quiet period for next week's meeting," with domestic market participants awaiting how the BSP will react to the latest peso movement. Quiet periods are the blackout windows central banks observe before rate-setting meetings, during which officials limit public comment on policy.

The BSP has been on a tightening path since April, delivering a total of 75 basis points in hikes that raised its key policy rate to an over one-year high of 5%. Its next meeting is scheduled for Oct. 22.

Mr. Asuncion said the peso could gain support if US inflation eases and Fed expectations become less hawkish, improving global risk sentiment.

"However, as long as the dollar remains broadly strong, the peso is likely to stay volatile and may continue trading near current levels," he said.

Federation of Philippine Industries Chairperson Elizabeth H. Lee said in a Viber message that the peso's decline could strengthen exports, noting that "export competitiveness depends not only on exchange rates but also on efficient logistics."

"The weaker peso creates both pressure and opportunity. The key is making sure our ports and supply chains can move as fast as our industries need them to. Fix congestion as soon as possible, and we give Philippine manufacturers a fighting chance to compete and sustain growth," she said.

Reporting by Aaron Michael C. Sy; originally published by BusinessWorld: Philippine peso sinks past P63 per dollar for first time