With the Philippine peso emerging as an outperformer among Asian currencies following the United States’ (US) tariff hike, Japanese financial giant MUFG has maintained its forecast that the local currency will continue to strengthen in the fourth quarter of 2025 through next year.

Last Friday, the peso stayed at ₱56.47 against the US dollar, closing the week at the same rate as last Thursday. This was despite the local currency hitting an intraday high of ₱55.49, a brief return to the ₱55:$1 level, according to the Bankers Association of the Philippines (BAP).

It reached an intraday low of ₱56.55, which was also its opening rate. Total trading volume declined to $1.225 billion from Thursday’s $1.389 billion.

Singapore-based United Overseas Bank (UOB) argued that despite the Philippines receiving a higher 20-percent US tariff, relative to the previous 17 percent, the peso was still “the outperformer in the region.”

This strength was “possibly because the economy is relatively more insulated from tariff impacts given a lower export reliance while the Philippines also received a relatively lower tariff rate compared to most ASEAN [Association of Southeast Asian Nations] economies,” said Quek Ser Leang and Peter Chia, UOB senior technical strategist and senior foreign exchange (forex) strategist, respectively.

In a July 11 report, MUFG Global Markets Division for Asia senior currency analyst Michael Wan said that US President Donald Trump’s new tariff announcement last week was a “downside surprise” for analysts, “given that we were implicitly expecting a trade deal between the US and the Philippines, considering the small bilateral trade deficit between the two countries.”

However, Wan remains optimistic that the forex will hover around the ₱55:$1 level, citing “several” offsetting factors.

“Beyond tariffs, the positive factors we highlighted previously—including rising FDI [foreign direct investment] approvals, manageable inflation and domestic rice prices, coupled with forecasts of further US dollar weakness—are still supportive of the Philippine peso,” Wan said.

“We keep our current dollar-peso forecasts at P55.5:$1 by the fourth quarter of 2025 and P55:$1 by the first quarter of 2026 for now,” Wan said.

He noted that the 20-percent rate is still lower than those imposed on other countries including “Thailand, Indonesia, and Malaysia, although it is now at the same rate as Vietnam.” He added that Philippine exports to the US make up only a small part of the economy, and much of these exports—mainly electronics—are currently exempted.

“Last but not least, even if the Philippines offers meaningful import tariff cuts to the US in upcoming negotiations, the competition with domestic industry may be relatively limited,” Wan asserted.

Regarding the upcoming negotiations between Philippine and US officials on Trump's tariffs, John Paolo Rivera, senior research fellow at state-run policy think tank Philippine Institute for Development Studies (PIDS) said he believed that a “stronger peso/weaker dollar” deal could be a likely concession.

“A stronger peso may be seen as a concession or goodwill signal in trade negotiations especially since a weaker US dollar aligns with the US goal of improving its export competitiveness,” Rivera said.

“While forex is not typically the centerpiece of trade talks, a relatively stronger peso could help ease some pressure from the US side and may be used to frame the Philippines as a cooperative trade partner,” he explained.

Therefore, he said, the bigger factors in securing lower tariffs will be the Philippines’ market openness, investment environment, and its role in US strategic supply chains, particularly in semiconductors and critical minerals.

Other private-sector economists still have no solid expectations on whether a currency deal would be a likely concession. To recall, Trump wants a weaker dollar to improve the competitiveness of American products.

“So far, there has been no signaling on that in recent months, but it’s true that a weaker US dollar would benefit US exports,” said Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC).

“Any positive developments on the Philippine trade talks would help sentiment on the local financial markets including the peso,” Ricafort said.

However, he also said that “higher US tariffs would slow down Philippine export sales and the US dollar sales that they generate and bring home to the country.”

Similarly, Oikonomia Advisory and Research Inc. economist Reinielle Matt Erece said that a stronger local currency “may be a disadvantage for our exports as the stronger peso may make our exports more expensive.”

“As a net importer, it is in the Philippines’ best interest to be more competitive in international trade and to be able to sell more to restore the country's trade balance,” said Erece.

The latest preliminary data from the Philippine Statistics Authority (PSA) showed exports grew by 15.1 percent to $7.29 billion in May, whereas imports contracted by 4.4 percent to $10.58 billion. This narrowed the country’s foreign trade deficit by 30.4 percent to $3.29 billion that month.