Philippine Peso Set for Best Start in 14 Years on Stock Inflows, Weak Dollar

The Philippine peso is set for its best start to the year since 2012, as foreign inflows into the stock market and a weak US dollar bolster the currency.

The currency is up almost 2% this year, the most since early 2012, as the currency’s rebound from a record low in January gathers pace. Investors poured money into the local stock market for two straight months , after eight years of net outflows.

Asian currencies are advancing this year, bolstered by a stronger yuan , which acts as an anchor for the region, as well as by growing bearishness over the dollar. In the Philippines, a rebound in equities is luring foreign funds with the approaching bull market territory.

The currency’s gains come with a caution, however, as some analysts see the rally fading toward the year end on the prospect of interest-rate cuts. BMI, a Fitch Solutions unit, expects the currency to fall over 3% from Friday’s level to 59.50 per dollar by the year end.

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“The Philippine peso’s recent strength reflects a weaker dollar, rather than a sudden improvement in domestic fundamentals,” said , country risk analyst at BMI in Singapore.

BMI expects the central bank to lower rates by another 25 basis points to 4% by end-2026, which would narrow the rate differential between the US and the Philippines and weaken the appeal of the currency.

A massive corruption scandal dragged economic growth last quarter to its slowest pace in 14 years outside the pandemic in the country. Bangko Sentral ng Pilipinas will support the economy to the extent that it won’t spur inflation, Governor Eli Remolona said this month.