What Is the Philippine Peso (PHP)?

The Philippine peso, abbreviated as PHP in foreign exchange (forex) markets, is the national currency of the Philippines. Peso is "piso" in Filipino. The Philippine peso is made up of 100 centavos or "sentimos" in Filipino and is often represented with the symbol ₱.

As of June 2021, 1 U.S. dollar buys approximately 48.7 PHP.

Key Takeaways

  • The Philippine peso has the currency abbreviation PHP and frequently goes by the symbol ₱.
  • The currency underwent substantial devaluation under the pegged system but became free-floating after the 1993 New Central Bank Act.
  • This move brought more stability to the currency and eradicated the black market, which existed during the pegged system.

Understanding the Philippine Peso (PHP)

In 1898, the Philippines underwent a revolution and issued its own coins and paper money backed by the country's resources. The revolution was short-lived—this money stopped circulating at the beginning of the 20th century.

The U.S. took control of the Philippines and started a currency that was pegged to the price of gold, and about half the price of a U.S. dollar (USD) at the time. A peg of ₱2/USD lasted until the country became independent in 1946.

The Central Bank of the Philippines was created in 1949, and through the 1950s it strove to maintain the 2:1 peg with the USD. This became impossible as a black market for pesos started outside of the fixed system, where the ₱ routinely traded at 3:1. The currency was devalued to ₱3.90/USD, and in 1970 was devalued again to ₱6.43/USD. While the country struggled to stabilize the exchange rate, the currency continued to devalue. In 1983, it traded near ₱11/USD and by 1986 it was near ₱20/USD.

The New Central Bank Act of 1993 set the Philippine peso on a path to being a free-floating currency. While this led the exchange rate to become substantially higher than the earlier pegged levels, the move to a free-floating currency has brought stability and the black market for the currency (which nearly always reflected a lower value of the ₱ than official channels) has ceased to exist.

Example of a U.S. Dollar/Philippine Peso Quote

Assume a traveler from the U.S. is heading to the Philippines for a holiday. They need to buy some Philippine pesos (PHP) for their trip. Since the exchange rate is free-floating, the rate will change by the day, and even by the minute.

Assume that the traveler checks the exchange rate and it is 52.27 USD/PHP. That means it costs 52.27 PHP to buy one USD, or, alternatively, you get 52.27 PHP for each USD.

While this quoted rate on currency websites is the last trade value (or sometimes the current bid value), our traveler will likely not be able to get close to that when wanting physical currency. Currency exchanges and banks will often charge 3% to 5%, and factor that into the exchange rate. Therefore, for each USD the traveler may only get ₱50.70 or ₱49.65, depending on whether the institution being used charges 3% or 5%.

If the traveler wants ₱50,000 at a rate of 52.27, they would need $956.57. But if the currency exchange factors about a 5% charge into their rate, they offer 49.65 and the traveler needs $1,007.05 to get the same ₱50,000.

When our traveler returns, they may have some Philippine pesos they want to convert back to USD. Let's say they have ₱5,000. Assume the exchange rate is still the same at 52.27, but remember that banks and currency exchanges typically take 3% to 5% on both sides of the transaction. So instead of only charging 52.27 for each USD, they are going to charge 53.84 to 54.88. That means that ₱5,000 won't buy as many USDs.

At 52.27, ₱5,000 converts to $95.66. But at 54.88, it only converts to $91.11, which is about 5% less.