A resurgence in global energy prices is poised to test the resilience of the peso, though aggressive monetary policy from the Bangko Sentral ng Pilipinas (BSP) will likely insulate the currency from extreme volatility, according to DBS Bank.

DBS senior economist Radhika Rao wrote in a commentary published last Friday, July 10, that the local currency could take refuge under the roof of restrictive monetary policy.

“In the face of a rebound in energy costs and resultant pressure on the peso, a proactive BSP policy stance and the prospect of further rate tightening should help limit excessive currency volatility,” Rao said.

Against this backdrop, DBS continues to expect the BSP to hold its restrictive stance, calling specifically for an additional interest rate hike of a cumulative 50 basis points (bps) through the third quarter of the year, especially in an environment where core inflation continues to accelerate.

Raising the key borrowing costs by up to 50 bps more would effectively bring the benchmark rate to 5.25 percent from the current 4.75 percent.

Japanese financial giant MUFG Bank, Ltd. shared this hawkish outlook, noting that elevated headline inflation remains high enough to keep the BSP in a tightening mode.

While headline inflation has shown a cooldown since its overheating print in April, the country’s underlying price pressures show no signs of unwinding. Hence, the call for a sustained hawkish signal.

Headline inflation moderated to 6.4 percent in June from 6.8 percent in May and its peak of 7.2 percent in April. Meanwhile, core inflation—which strips away volatile food and energy items—moved in the opposite direction.

Core price growth quickened further to 4.4 percent from 4.1 percent in the previous month, signaling that persistent price pressures remain deeply embedded in the economy. It remained above the BSP’s inflation target of 3 percent and its tolerance band of 2 to 4 percent.

These headline and core inflation overshoots have effectively pinned the monetary authorities to their hawkish position.

BSP Governor Eli Remolona has signaled that the central bank is not ready to lower its guard, reiterating that the BSP remains “prepared to tighten further, if necessary, to prevent second-round effects and keep inflation expectations anchored.”

Further, the external environment is compounding the pressure on the local currency. Renewed tensions in West Asia have weighed on regional risk sentiment, fueling a firmer United States (US) dollar and a surge in oil prices that threatens to reverse recent gains.

According to Rao, the retreat in peso yields seen earlier in June is “set to reverse” as global energy costs climb once more.

Data monitored by MUFG analysts showed that the peso has weakened by 4.6 percent against the greenback in the first half of 2026.

Compared to other regional currencies, the peso’s performance has been situated in the middle of the pack, showing more resilience than some neighbors while lagging behind others. It has outperformed the Indonesian rupiah, which has fallen by 8.2 percent, as well as the Indian rupee (6.1 percent) and the Thai baht (5.8 percent).

Meanwhile, the Vietnamese dong has strengthened against the dollar by 0.1 percent since January. Many regional peers have also shown more stability against the dollar, including the Hong Kong dollar, which has depreciated by 0.7 percent, the Singapore dollar (0.4 percent), and the Malaysian ringgit (0.3 percent).