?65 to $1 looks good

Last Friday, Aug. 28, 2026, the peso-dollar exchange rate reached ?62.27, which may be the highest or lowest, (depending from which viewpoint) exchange rate in the last 11 years. The short-term reasons for the peso weakness are: the higher oil prices that are burdening all net oil importing countries, the uncertainties in the global financial markets, and the narrow interest differential between the U.S. and the Philippines interest rates.

The Philippines is a net importer country as it imports more than its exports, so we always need more foreign exchange to pay for capital and consumer goods from other countries. This is partially covered by the OFW remittances, BPO foreign exchange earnings, and foreign short/long term investments. When there is turmoil in the world financial markets, due to geo-political and economic reasons, investments to developing countries slowdown. So, these countries borrow from the World Bank, the ADB, the IMF, and from other public/private banks. These loans have to be paid over time in foreign currencies, so they have to be at affordable and sustainable levels.

To attract short-term foreign investments, developing countries interest rates are usually higher than that of developed countries. This differential should be enough to offset the possible deterioration of the investee countries exchange rates. At this time, the Philippines BSP benchmark rate is at 5% and the prime rate to borrowers is at 7.5%, while the U.S. Fed rates is at 3.75% and their prime rate is at 6.5%. Since these rate differentials are only at 1% to 1.25%, these will not attract the arbitrage/carry trade investors to sell dollars to invest in short term peso deposits and securities. The 6%-7% inflation rates in the Philippines as against the 3%-4% in the U.S. are additional factors, so the ?-$ exchange rate have to go higher, and the peso interest rates will also have to go higher.

The long-term factors that affect the Philippines foreign exchange rates, are solid economic fundamentals and prospects. A sustained respectable GDP growth rate for a number of years to reach equilibrium income, will keep the balance of trade and balance of payments within range. The Philippines has actually proven this economic growth potential, when its GDP grew by 6.5% to 7.5% in the Cory Aquino and Nonoy Aquino years.

The country has significant mineral and manpower resources to get back at these growth levels with a good and responsible government. The Philippines investment rating from all global rating agencies, are just below investment grade, supported by our robust domestic consumption, OFW/BPO earnings/remittances, and demographic distribution. We have made the first rung in the middle-income developing country status.

The Philippines current low GDP growth in 2026 in the 3% to 3.5% range, should just be a hiccup/temporary situation brought about by the DPWH corruption scandal/waste of resources and the Iran war, which led to government underspending and higher fuel prices. Letting the ?-$ exchange rate fall to the lowest level as dictated by the market, may just be the right corrective measures for the economy, the government, and the politicians. This will limit importations to the minimum, will spur domestic production of substitute goods, and increase exports in volume and value. This will also reward the OFWs who remit to their relatives in the Philippines and generate more BPO businesses, which have been propping up our consumption expenditures.

This will also get more tourists into the Philippines as we will be less expensive than Thailand and Vietnam. Then, it will also stop our politicians from going on foreign junkets and curtail their penchant for buying foreign properties/investments from corruption windfalls.

?65 to $1, is right until we get our economics and politics right, then we get back to ?52 to $1 in 2028, if we elect the right government officials.