By Aaron Michael C. Sy, Reporter | BusinessWorld

The Philippine peso sank to a fresh record low against the US dollar on Thursday, as volatile oil prices and escalating tensions in the Middle East overshadowed a larger-than-expected interest rate hike from the Bangko Sentral ng Pilipinas (BSP), the country's central bank.

The local currency shed 15.9 centavos to finish at P63.52 to the greenback, down from its previous record close of P63.361 on Wednesday, data from the Bankers Association of the Philippines showed. It was the peso's 35th record low this year and its sixth so far in October, as well as the fourth consecutive trading day it ended at a historic trough.

Year to date, the peso has weakened by P4.73, or 7.45%, from its P58.79 finish on Dec. 29, 2025.

The unit opened Thursday's session slightly stronger at P63.31 per dollar and touched an intraday best of P63.30. Its worst showing for the day came at P63.545, which also marked the currency's weakest level on record, beating the previous all-time trough of P63.373 logged just a day earlier. Dollars traded rose to $1.716 billion from $1.34 billion in the previous session.

Analysts said persistent dollar demand and external pressures arising from escalating Middle East tensions weighed on the peso despite the BSP's surprise 50-basis-point (bp) rate hike on Thursday. While a rate increase would ordinarily be expected to lend a currency support, the move proved insufficient against the external drag.

"The peso's weakness can be attributed to a strong US dollar amid uncertainty over US interest rates; high oil prices driven by Middle East tensions, which increase the Philippine import bill; and domestic vulnerabilities, including external deficits and persistent demand for dollars," Ser Percival K. Peña-Reyes, a senior research fellow at the Ateneo Center for Economic Research and Development, said in a Viber message.

"External pressures are the main trigger, amplified by our reliance on imports," he added.

Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said separately in a Viber message that global uncertainty stemming from the country's widening balance of payments (BoP) deficit continues to weigh on investor sentiment and the country's external position.

"Monetary tightening can help moderate depreciation but it cannot fully offset global dollar strength and structural external imbalances," Mr. Rivera said.

On Thursday, the BSP raised the target reverse repurchase rate — the central bank's key policy rate, which anchors borrowing costs across the economy — for a fourth straight meeting, by 50 bp, to an almost two-year high of 5.5%.

One trader noted that growing domestic inflationary concerns could intensify the local currency's weakness. That dynamic matters beyond the trading floor: the import reliance economists flagged means a weaker peso lifts the cost of foreign goods, the channel through which currency moves can feed into domestic prices. BSP Governor Eli Remolona, Jr. expressed concern on Thursday that the peso's current weakness could prove inflationary. A second trader, speaking by telephone, said the governor's comments on foreign exchange intervention tactics dragged the local unit down.
"We're not hiking the policy rate to defend the peso. We do intervene a little bit in the foreign exchange market, but that's mainly to avoid the swings in the exchange rate that tend to be inflationary. We have estimates of how much the peso has to move before it becomes inflationary, and that's when we tend to intervene," Mr. Remolona told a press conference after the policy meeting.

Asked about the pass-through effect, he said: "Forgive me if I don't tell you the threshold, because then it helps speculators decide when to go in and when not to go in. But there is a threshold. Not every depreciation is inflationary. It has to be significant enough."

China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message that any sustained recovery in the peso will hinge on restoring confidence in the domestic economy. "Stronger economic fundamentals, faster growth, and greater business confidence will provide more lasting support for the peso," she said.

Mr. Peña-Reyes added that the peso could reach the P64-per-dollar level in near term, noting it now needs to weaken by only about 1% to hit that mark. "If oil stays expensive and the dollar strengthens, P64 could be tested within days or weeks. Easing geopolitical tensions or a weaker dollar could delay it," he said.

The second trader also said the peso could still draw support from remittances in the final two months before the holidays, though the effect may be less pronounced than in previous years due to external factors. For Friday, the trader expects the peso to move within a P63.40-to-P63.80 range against the dollar. Beyond the immediate session, oil prices, the dollar's trajectory and the pace of holiday remittances are the variables economists and traders flagged as likely to shape the currency's path.