USD/PHP: Higher oil and conflict risks weigh on Peso – MUFG

MUFG’s Senior Currency Analys Michael Wan argues that the Philippines Peso is vulnerable as the Iran and Middle East conflict threatens to keep the Strait of Hormuz closed and Oil above US$100/bbl. Their base case still sees USD/PHP at 58.00 by 4Q2026 with Oil near US$70/bbl, but scenario analysis points to significantly higher USD/PHP levels under sustained higher Oil prices and a hawkish Federal Reserve.

Peso vulnerability under oil shock scenarios

"We see the Philippines Peso as vulnerable and USD/PHP possibly rising above the 60 levels if the Iran and Middle East conflict is sustained and the Strait of Hormuz remains closed, with oil prices already reaching above US$100/bbl at the time of writing: While we do not yet know how the Iran and Middle East conflict will play out from here, it’s important to stress our current base case USD/PHP forecast of 58.00 by 4Q2026 assumes a resolution after March 2026 and implicitly for oil prices to fall towards the US$70/bbl levels."

"These scenarios are partly informed by our USD/PHP modelling exercise."

"Our model-based estimates tell us that USD/PHP could range between 59.00-60.00 in a scenario of US$90/bbl oil prices, and between 60.00-61.00 with US$100/bbl oil prices, especially if this is coupled with a hawkish Fed."

"Of course, not all things are equal in practice, and the BSP may choose to not just pause on policy rates but even hike rates, which would provide some offsetting support to PHP."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)