Peso seen settling at P59.70:$1 by end-2026

THE PESO may settle at P59.70 against the dollar by end-2026 on expectations of an economic rebound driven by improved investor confidence, Metropolitan Bank & Trust Co. (Metrobank) said.

In a commentary dated Feb. 10, Metrobank trimmed its peso forecast for end-2026 to P59.70 a dollar from P60.80 previously.

It likewise projects the peso to end 2027 at P58.50 versus the greenback, from its earlier estimate of P58.90.

“(A)n anticipated economic growth rebound and improved investor confidence, thanks to better government spending, could support the peso,” it said.

If the bank’s 2026 forecast holds true, the local unit would end the year weaker than its P58.79 finish against the dollar on the last trading day of 2025.

The lingering effects of the flood control corruption scandal and uncertainties in the global market pushed the peso to test new lows at the start of the year.

On Jan. 15, it closed at P59.46 per dollar, breaking the previous all-time low of P59.44 recorded just the day prior.

However, it has recently strengthened amid a weak dollar. On Wednesday, the local unit hit a near four-month high after closing at P58.29 versus the greenback, up 24 centavos from its P58.53 finish on Tuesday, data from the Bankers Association of the Philippines showed.

Meanwhile, Metrobank noted that the peso could struggle to regain further strength as the country’s current account is projected to remain at a shortfall this year.

“Still, the projected current account deficit this year — although narrower than last year’s — would cap the peso’s strength,” it said.

Based on the latest central bank data, the current account balance stood at a $12.5-billion deficit by the end of the third quarter. This was equivalent to -3.6% of gross domestic product (GDP).

The Bangko Sentral ng Pilipinas (BSP) expects the current account gap to end at $15.5 billion in 2025 or -3.2% of GDP, before narrowing to $15.3 billion or -3% of GDP this year.

Metrobank also noted that the expected widening of the interest rate differential between the US Federal Reserve and the BSP could weigh on the local currency this year.

It sees the Fed delivering a total of 50 basis points (bps) in cuts this year, down from its initial projection of 100 bps, to bring the Federal Funds Rate to 3.25% by yearend.

In an earlier report, the bank said that the current economic backdrop gives the BSP room to lower its key policy rate further to 4% from the current 4.5%.

If both projections are realized, the difference between the two central banks’ benchmark interest rates would end at 75 bps. — Katherine K. Chan