The peso's recent relative strength against the US dollar would unlikely last for long amid external and domestic threats, according to Singapore-based United Overseas Bank (UOB).
While the local currency had traded flat against the US dollar year-to-date as of the first week of this month, "the calm in the Philippine peso is unlikely to persist, especially with the recent tariff escalation by the Trump administration in early March," UOB said in its quarterly global outlook report for the second quarter of 2025.
During the past two weeks, the peso has traded at the 57:$1 level.
"With external downside risks dominating the outlook for domestic growth, inflation, monetary policy and the Philippine peso, we keep our call for the [currency] to weaken anew in the near term," UOB said.
The bank noted that among the external developments that could depreciate the peso include US President Donald Trump's protectionism and modest economic growth in China, among other geopolitical risks affecting global oil prices as well as remittances from Filipinos working and living abroad.
These foreign developments would also "deter trade and investment flows into the Philippines" during the near term, the bank added.
"On top of that, the outcome of the midterm elections slated for May 12 could be another key influencing factor for the Philippine peso in the coming quarters," UOB said, noting that "potential shifts in economic policy and political stability post the election will have an effect on investor confidence on the country."
UOB expects the peso to weaken to 58.5:$1 during the second quarter; 59.5 versus the greenback by the third quarter; and the 59 level in the final quarter of the year, before returning to 58.5 in early 2026.
These updated forecasts are more moderate than the bank's first-quarter projections, which had anticipated the peso would hit 59.5:$1 in the first quarter of 2025; reach the 60 level during the second quarter; weaken further to 60.5 by the third quarter; and settle at 60:$1 in the fourth quarter.