Peso could recover below 60:$1 – BofA

If oil shock eases

MANILA, Philippines — The peso may return below the 60-per-dollar level by year-end if geopolitical tensions in the Middle East ease and oil-related inflation pressures subside, according to Bank of America.

BofA Philippines country executive Vince Valdepeñas said the bank sees the local currency trading near 60 in the first half of 2026 before potentially strengthening later in the year.

“From a forex perspective, we see the peso trading around the 60 level in the first half of 2026, with scope to move back below 60 by year-end, assuming geopolitical tensions ease,” Valdepeñas told The STAR in an email interview.

The peso has been pressured by a strong dollar, heightened global risk aversion and concerns that higher oil prices could further stoke inflation in the Philippines, a net oil importer.

The local currency slumped to a new all-time low of 61.75 to the dollar on May 18.

Valdepeñas said uncertainty initially drove stronger activity in the bond and foreign exchange markets as investors and corporates adjusted positions, although trading has since become more selective.

“We saw an initial pickup in trading activity as markets reacted to the news flow, with participants actively adjusting positions,” he said. “Over the last month, the activity has become more selective.”

“Overall, corporates and investors remain engaged but prudent, waiting for clearer signals while staying prepared to re-enter the market as conditions become more stable,” he added.

BofA expects activity in both bonds and forex to remain active in the coming months amid continued macroeconomic uncertainty.

On the rates side, Valdepeñas said rising inflation expectations and the Bangko Sentral ng Pilipinas’ recent rate hike have prompted investors to reassess positions, with the most noticeable adjustments seen in the middle portion of the yield curve.

The central bank raised interest rates by 25 basis points last month as inflation risks intensified, partly reversing its earlier easing cycle.

Despite the cautious backdrop, BofA sees room for renewed demand for Philippine bonds later this year as yields become more attractive.

“Current yield levels are increasingly attractive, and with the Philippines’ inclusion in the global bond index, we see the potential for renewed investor demand emerging in the latter part of 2026,” Valdepeñas said.

Foreign investors have “modestly pared exposures” amid the strong dollar and broader risk-off sentiment, reflecting caution over forex volatility and bond market movements. Still, Valdepeñas said interest in peso-denominated bonds remains strong.

“Investors are engaged and opportunistic, closely watching for clearer signals and more attractive entry points,” he said.

He added that bond issuance, refinancing and selective deal making could improve if oil-related risks ease in the second half.

“Assuming our base case of easing oil-related risks in the second half of 2026 holds, we believe conditions could become more supportive for refinancing, issuance and selective deal making,” Valdepeñas said.