Peso weakening continues: Should OFWs remit or hold? Know what’s behind the trend

Manila: The Philippine peso has experienced a noticeable weakening against the US dollar, down about 3%.

The peso began 2025 weakening, trading at around ₱58.20 per US$ in early January (from ₱57.91 previously), before making a slight recovery, averaging ₱58.094 in February before strengthening, posting an average ₱56.853 vs US$ in April 2025.

In May 2025, the peso was at its strongest (so far this year), averaging ₱55.625 per US dollar, before sliding to an average of ₱56.70 in July.

On Tuesday (July 29), it stood at ₱57.110 vs the greenback, as per data published by the Bangko Sentral ng Pilipinas (BSP).

Analysts projected the peso to hover around ₱59/USD by mid‑2025, due to a stronger dollar and slower US Federal Reserve easing.

By April 9, 2025, the average rate stood at about ₱57.31/USD, indicating some stabilisation.

Forecasts going forward (e.g. from LongForecast and Metrobank analysts) suggest the USD/PHP rate will range between ₱56–58 for the remainder of the year, possibly ending around ₱57.9 per US dollar, as per Metrobank.

MUFG estimated the peso weakening to roughly ₱59.7 in Q1, improving to ₱58.8 by year‑end 2025, as inflation moderates and incoming rate cuts support the currency.

Key factors driving peso weakness

US dollar strengthening
A key driver behind the peso’s decline has been the broadly stronger US dollar globally. The US government’s drive to onshore investments alongside the Fed’s moves have attracted capital flows into dollar assets, making borrowing in dollars less expensive and investing in dollar-denominated assets more attractive. This dynamic pushes emerging market currencies like the peso downward.

Inflationary pressures and monetary policy “divergence”

Although BSP has been proactive with rate moves, the pace and scale have not fully matched the aggressive tightening seen in the US, resulting in a widening interest rate gap that discourages peso-denominated investments.

Import costs and trade deficits

The peso weakening is also partly influenced by the country’s heavy import demand. As fuel prices remain volatile globally, importers pay more in peso terms for essential commodities, widening the trade gap. This increased demand for foreign currency to pay for imports further weighs on the peso.

Global economic uncertainties
Lingering geopolitical tensions and fears about global growth prospects have led risk-averse investors to seek safe-haven currencies such as the US dollar. Emerging market currencies, including the Philippine peso, tend to feel the pressure during such risk-off environments.

Late December 2024: The BSP cut its reverse repurchase rate to 5.75 %.

February 2025: The policy rate was held at 5.75 %, surprising markets with a pause after earlier cuts.

April 10, 2025: A 25 bp cut lowered the rate to 5.50 %. The BSP downgraded its 2025 inflation forecast from 3.5 % to 2.3%.

June 19, 2025: A second 25 bp cut brought the policy rate down to 5.25 %, the lowest in roughly 2½ years. Inflation slowed to around 1.3 %–1.4 %, well below the 2–4 % target range.

As of July 28, 2025, BSP Governor Eli Remolona reaffirmed plans for two more rate cuts in 2025, conditional on incoming data.

These would continue its “baby-steps” along the monetary easing trajectory. 

The BSP has indicated its intention to transition toward less restrictive monetary policy settings, allowing previous adjustments to continue filtering through the economy.

Two additional cuts in 2025 would further ease borrowing costs, encouraging consumer spending, business investments, and credit growth, which can help sustain or boost economic activity during periods of moderation or uncertainty.

Rate cuts typically make borrowing cheaper and increase money supply, potentially putting upward pressure on inflation.

However, the BSP's February 2025 reports project inflation to settle within the target range of 2.0-4.0 percent for 2025-2026, with risks broadly balanced.

If inflation remains contained or below BSP's forecasts, additional easing could be managed without triggering runaway inflation.