Peso 'advantaged' by low trade exposure

With the return of United States (US) President Donald Trump's tariffs on the horizon, the Philippine peso may be advantaged by the economy's relatively less exposure to global trade, according to Japanese financial giant MUFG Bank Ltd.

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"We are most positive on the currencies of domestic-oriented economies such as India, the Philippines and Indonesia, either because we expect growth-inflation balance to improve attracting capital inflows, [and] the likelihood of trade deals with the US for all three," MUFG Global Research said in its Asia FX outlook report for the second half of 2025, published on July 4.

However, MUFG cautioned that the peso and domestic inflation would face pressures if tensions re-escalate in the Middle East and global oil prices soar.

"The Israel-Iran conflict and the resultant oil price shock certainly led to a disproportionately negative impact on the Philippine peso, which is one of the more vulnerable currencies in Asia to oil price spikes given its relatively large current account deficit," it noted.