President Rodrigo Duterte gestures as he delivers a speech to the members of the Philippine Army during a visit at the army headquarters in Taguigon October 4, 2016. Romeo Ranoco, Reuters

MANILA – The peso could weaken to P50 to the dollar if President Rodrigo Duterte’s war on drugs and tough talk stir “prolonged political uncertainty” that would add to geopolitical risks, Fitch Ratings’ BMI Research said.

The local currency’s sudden weakness in September was “driven largely by deteriorating investor sentiment” over the President’s statements hitting back at the US for criticizing his anti-narcotics drive, BMI Research said in a note dated Sept. 30 but released only on Wednesday.

“In the event that these fears translate into something more tangible leading to prolonged political uncertainty, we believe that a further slide of the peso beyond 50 to US dollar could be likely,” BMI said.

A selloff in the Chinese Yuan and a looming rate increase by the US Federal Reserve could “set off broad-based emerging currency weakness” that will not spare the peso, it said.

Duterte on Tuesday told US President Barack Obama to "go to hell," the latest in a series of tirades sparked by US criticism of mounting deaths linked to his anti-illegal drug campaign.

He also threatened to end joint war games between Filipino and American troops, casting doubts on the future of the long-standing military alliance between Manila and Washington.

While criticizing the US, Duterte has signaled shifting alliances to Washington's rivals, Beijing and Moscow.

The peso averaged P48.356 on Wednesday morning, after weakening to P48.380 in intra-day trading, according to the Philippine Dealing System. The local currency hit fresh seven-year lows against the dollar last month.

BMI said it expected the peso to average P47.95 this year, P48.50 in 2017 and P48 in 2018. The currency has a “slight appreciatory bias” due to continuous dollar remittance flows.

Budget Secretary Benjamin Diokno said the peso’s weakness was no cause for alarm as it would boost the value of dollar remittances.

In August, before the peso’s decline, Finance Secretary Carlos Dominguez said he preferred a “slightly weak” peso to help overseas Filipino workers.