What Is the Philippine Peso (PHP)?

The PHP is the currency abbreviation or currency symbol for the Philippine peso, the 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 ₱.

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.
  • While the exchange rate between 1993 and 2019 was substantially higher than the earlier pegged levels, the rate is free-floating and therefore has brought more stability to the currency and eradicated the black market which existed during the pegged system.

Understanding the Philippine Peso

In 1898, the country 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 in 1901.

The US took control of the Phillipines and started a currency that was pegged to the price of gold, and about half the price of a US 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 they 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. It is not pegged and between 2003 and 2019 traded between ₱57 and ₱40/USD. Due to the free-floating rate, 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 USD and Philippine Peso (PHP) Quote

Assume a traveler from the US 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.